Avison Young, a Toronto-based real-estate company, has been a relatively modest player in the Canadian commercial real-estate market. But four years after it brought on an American CEO with global ambitions, its aggressive expansion to the United States is gathering steam.
Under CEO Mark Rose, Avison has grown from 298 employees to about 1,000, of which there are about 170 principals with equity stakes in the firm. It is now Canada’s largest independently owned, principal-led commercial real estate company, which Mr. Rose considers a key strategic advantage, and growing fast.
The vision Mr. Rose had for Avison is an example of a Canadian firm that adopted a strategic approach to successfully expand beyond our borders. “In 2007, I started to write a new strategy, by asking what would a real-estate services company look like if you could start from scratch,” says Mr. Rose.
Since 2008 it has opened offices in eight of the 10 top U.S. markets, plus another seven in promising secondary cities, such as Charleston, S.C., and Pittsburgh, Penn. The last two markets took a hard hit when the economy dropped in 2008 but are rebounding faster than the rest of the economy now.
Avison has 32 offices across Canada and the United States, up from 11 only in Canada in 2008, as it builds on a disciplined long-term strategy.
Mr. Rose is a chartered accountant by training who graduated from university at the age of 16 and went on to work with Harry and Leona Helmsley’s New York real-estate empire. His career then took him across the United States and Europe, where he honed a talent in strategic planning for the commercial real-estate industry.
In 2005, as CEO, he undertook a rebuild of Grubb & Ellis, now one of the global Top 20 commercial real-estate firms. It was sold in 2007 when the commercial real-estate market was at an all-time high.
After Grubb & Ellis, Mr. Rose took time to consider what kind of real-estate services company he would want to build.
The answer he arrived at called for an independently owned firm, led by top principals who understand their clients’ needs and who will run the company with those interests in mind. That structure, he believes, will enable them to focus on the long-term needs of their clients rather than what he sees as the short-term profit focus of the other leading global real estate giants, such as CBRE Group of Los Angeles, Colliers International of Seattle, Jones Lang LaSalle of Chicago and Cushman & Wakefield of New York, that consistently lead the global ranking sheets. They are all either publicly traded or are controlled by a dominant investor shareholder.
As the markets softened in early 2008, he recognized that an economic slowdown would open new opportunities in commercial property and he favoured the idea of being based outside the U.S., away from the impact of a depreciating U.S. dollar.
Avison Young, which Mr. Rose already knew because of its affiliation with Grubb & Ellis, was one of the first companies he talked with about the benefits of an independent, principal-owned firm.
Avison Young’s history dates back to a real estate firm founded in 1978 by Graeme Young in Edmonton, which in 1996 merged with Toronto-based Avison Associates.
Mr. Rose also appreciated Canada’s sound economic fundamentals and its strong resource base. Avison Young opened an office in Houston to take advantage of the cross-border energy business in 2009 even before it established a presence in primary U.S. markets such as Los Angeles and New York, which followed in 2011 and 2012, respectively. But it is the independent ownership structure that sets Avison apart.
Mr. Rose says replacing short-term shareholder interests with the interests of the top producing agents that Avison Young is seeking to attract with equity opportunities, among other things, is the structure that will best deliver on those promises for clients.
Time will tell whether multinational corporations, the most sought after Class A property clients, will buy into that strategy.
“As a newcomer, Avison Young is probably a little more flexible and can enter new markets more quickly and perhaps at a lower cost,” says John Andrew, who teaches Queen’s University School of Business’s first commercial property course.
“But they’ll lose some economies of scale,” Prof. Andrew says. “And they won’t have the same recognizable brand as a CBRE or Colliers. And that will matter to the large corporate giants, like Exxon, Microsoft and Google.”
The biggest clients will want to be able to negotiate better rates at global offices through exclusivity arrangements by giving their business to particular firms, Prof. Andrew says.
But that is nitpicking, Prof. Andrew says, considering the expansion that Avison has already achieved at a time when a window of opportunity opened. He likes Avison’s strategy of entering cities such as Charleston and Pittsburgh.
“It’s a good time to be getting into those cities,” Prof. Andrew says. “They seem to be selecting markets carefully.”
Earl Webb, director and president of Avison Young’s U.S. operations, says the U.S. economy is in a slow recovery mode.
“Although some cities are recovering more quickly, we haven’t yet seen a sustained job recovery,” he says. “From our point of view, I want the recovery to happen. I just don’t want it to happen too quickly.”
Last year, Avison, which is debt-free, raised $40-million in equity by selling a minority stake to Tricor Pacific Capital of Vancouver, a private equity firm. It will use the equity to acquire more top sales teams and open more offices.
National Real Estate Investor magazine ranked Avison Young 23rd on its Top 25 real commercial real estate brokerages in 2012 with total self-reported investment sales and leasing transactions of $2.8-billion (U.S.) That is still far behind the industry leader, CBRE, with self-reported transactions of $159-billion (U.S.) – but five years ago, Avison Young was not on the list.
Avison Young is now working on the next phase of its growth strategy, opening offices in Europe, Asia, Mexico and South America, beginning in 2013 to 2015.
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