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Recent mergers by Newmark and Cushman & Wakefield spur debate

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Two major commercial firms announced mergers in late September, and the industry took notice, as executives at competing brokerages dissected what Newmark and Cushman & Wakefield’s moves could mean for an industry where firms increasingly have a global reach well beyond New York.

Mostly, mergers and acquisitions that grow a commercial firm even large ones have beneficial effects, so long as they’re executed properly. As the market gets more competitive, the trend toward consolidation is expected to continue.

“The whole key is to strengthen your platform by acquiring other service lines, other disciplines that strengthen your existing platform,” said Richard Bernstein, New York area president for Trammell Crow Company. “The challenge, of course, is, once the merger is completed, to obtain operating efficiencies where you can maintain and build upon the increased revenue base.”

For Newmark, a relatively big presence in Manhattan commercial real estate, its September merger with Knight Frank gives the firm access to what is the largest privately owned real estate consultancy in the world. The new Newmark Knight Frank the firm’s name as of Jan. 1 will have 240 offices across 30 countries, with about 4,500 employees. Its annual revenues, according to a Newmark release, are expected to exceed $545 million.

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Industry giant Cushman & Wakefield, in its acquisition of longtime affiliate Royal LePage Commercial, basically tossed a huge blanket over the Canadian market by taking over one of that nation’s largest commercial real estate services firms. (The acquisition did not include Royal LePage’s residential real estate network.) The new Cushman & Wakefield LePage will have more than 500 employees in at least five Canadian cities.

“In the case of Cushman & Wakefield,” said Michael Colacino, president of Studley, “I think they’re looking to do just two things just reinforce their brand image, which is something that kind of covers the Earth, and to increase the size of their revenue year in and year out. They have to show growth.”

The push for ever greater revenue Colacino estimated that Cushman & Wakefield looks for annual profit margins of 15 to 20 percent means that consolidation may be a hallmark of the commercial industry in the years to come. It’s a quicker way for revenue growth, particularly for larger firms. And, for firms that are smaller than Cushman, like Newmark, mergers also enhance their reach in the market.

“[Firms are] trying to gain, obviously, coverage for a buyer community that is more and more concerned with picking an alliance partner that covers a wide range of areas than picking a single broker for a specific market,” said Peter Riguardi, president of New York operations for Jones Lang LaSalle.

“[The industry’s] become more national and more global,” he added, “and people want to spread out their risk from market fluctuation. So I think the industry continues to consolidate.”

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