Opportunity in uncertainty
Mark Rose recalls being in a taxi in London when the results of the Brexit vote, which will take Britain out of the European Union, were announced.
But Rose, chairman and chief executive of Avison Young, a fastgrowing Canadian commercial real estate services firm, isn’ t concerned. “Is Brexit financially a good thing for the U. K., EU and the global markets in the short term? At this point, no one knows. What we do know is that the smart money, as it always does, will look into the path that will derive the highest profit,” he said.
“I expect we’ll see some of the larger investors around the world acquire real estate if not portfolios in London and throughout the U. K., taking advantage of others’ fear. I also expect this will be the greatest non- issue since Y2K.”
Avison Young, which recently opened a fifth office in Germany, has been growing aggressively in the past seven years, from 11 offices in Canada and 300 employees to 78 locations in 71 markets, with 2,500 employees, is with the smart money. “If fear continues to keep pricing down in the U.K. and Europe, we will buy faster. It is no different than the way we looked at North America in 2008. We are equally excited about launching additional European operations while uncertainty exists.”
The financial crisis of 2008 was a turning point for the Canadian firm, which was being run as a group of provincial companies focused solely on the Canadian market. Rose, who had just sold a U. S. company affiliated with Avi- son Young and delivered a strategy speech at what was supposed to be his last principals meeting made the case for merging to compete on a global level.
“The previous four months, I had been interviewing clients, investors and real estate professionals around the world and came up with a strategy that didn’t have a company in mind but rather a series of concepts,” Rose said. Among those concepts: launch into the teeth of the recession.
“You want to build at the bottom of a cycle rather than at the top, which honestly should be more intuitive to people than it is,” he said. Another piece of the strategy was that the company could not be headquartered in the U. S. because all the major players are there, and because that peer group had largely all gone public or had public debt, Rose wanted to remain privately held and principal led.
“Cushman and Wakefield, Colliers, these companies are all public and structured from a command and control position. We have competed for the same clients for decades,” Rose said. “We needed a different company that could take a longer term approach with the client base. Right now, Avison Young is completely disruptive to its entire peer group.”
The strategy, which is a well established one, is working. There are no global public accounting or law firms, which may explain why Avison Young has been able to grow its global market share so effectively.
“The law firm model works. When you have a stake in the enterprise you work a little bit harder. That partnership model is engaging and one of the key reasons he’s been able to acquire these regional brokerages he keeps swallowing up,” said Michael Brooks, chief executive of the Real Property Association of Canada (REALpac). To date, Avison Young has acquired more than 30 companies and has 350 partners.
The size of the global institutional grade investment market ( properties you can buy) is estimated to be worth about US$ 28 trillion. The Canadian portion i s remarkably small, roughly US$800 billion.
“The globalization of real estate has been accelerating over the past 10 years. Foreign investors buying assets in Canada are buying assets in other countries as well. So, if a broker, such as Avison Young, does a good job for these investors in Canada, why shouldn’t they represent them in France or Brazil, too? Real estate money, hard asset money, is looking around the world for risk- adjusted return,” Brooks noted.
“The Avison Young model is very much aligned with what real estate money wants to do. That’s also why you have the same movement in some of the large global law firms, the big four accounting firms. Even facility management firms like CB Richard Ellis or Prologis out of the U. S. are global. It’s a natural evolution. Only, few of Avison Young’s Canadian competitors are making the same global push.”
And Avison Young is pushing. The company has increased revenue and profits more than 10 times since 2008. Revenue now exceeds $ 500 million, and is growing. Having expanded first into the U.K. and Germany, Rose is now looking at France, the Netherlands, Poland, Spain and Ireland.
“Post Brexit, things are a little less expensive than they were a few weeks ago.”