By Maria Patterson
That timeless belief, “all real estate is local,” is so ingrained in the minds of most practitioners that eyes often glaze over when the topic of global real estate is brought up. But Leading Real Estate Companies of the World® has been taking an alternative view since the early 2000s, when it actively began expanding to other countries from its strong U.S. base.
“Real estate isn’t local or global,” says LeadingRE President/CEO Pam O’Connor. “It is both. Those who ignore the global piece are missing enormous opportunities.”
Recently, LeadingRE brought on its own chief economist to share insights on the global economy and how it impacts real estate. Dr. Marci Rossell, whose background includes stints with the Federal Reserve Bank, Oppenheimer Funds and as chief economist for CNBC, believes that real estate is only beginning to feel the effects of globalization.
“Globalization is still a strong force in real estate, despite the recent rise of economic nationalism worldwide,” says Rossell. “The factors that drive real estate buyers to one area of the world—things like safe political environments, cultural and family ties, the supply of talent—are still in place. And while a stronger dollar makes U.S. real estate more expensive for foreign buyers, these other forces are a powerful counterbalance to that trend. Globalization may be under threat, but it represents an international integration arising from economic, cultural and political factors. It is here to stay.”
The iPhone has had a lot to do with this. Introduced in June 2007—less than 10 years ago—it has unleashed a new era of innovation, made the internet and global communication accessible to the masses, and further eroded cultural differences. The world population as of August 2016 is 7.4 billion people, and the median age is 30.1 years old. This is the iPhone generation, and we can only expect more global integration in the future as a result.
But if you’re sitting in Omaha or Cincinnati or Atlanta, you may still be asking, “What does this have to do with real estate in my market? We don’t have a lot of international buyers.”
In 2015, NAR reported that foreign buyers purchased 214,885 residential properties from April 2015 to March 2016, a 3 percent increase over the prior year. While most of that has been in coastal markets like San Francisco, Los Angeles, Seattle, New York and Miami, many Chinese have purchased in college towns across the country based on where their children are studying. In any market, there is likely more international activity than you think. Individuals from other countries often gravitate to the same real estate agents who have worked with their friends and family or financial advisors and have thus established a foundation of trust. You could be missing out on international business in your town or city simply because you are underestimating the potential business and have not focused on it.
Even if you have few foreign buyers in your market, no one can ignore the changing demographics in this country in virtually every state and region, represented by millions of potential real estate buyers who come from different cultures and ethnicities.
Non-Hispanic whites are now 62 percent of the American population; they will be less than 50 percent by about 2055. Today, about 14 percent of all Americans are foreign-born, versus 5 percent in 1965 (though, ironically, that 14 percent is similar to what it was in the early 20th century). These changes in the composition of our country have major implications for real estate as we usher in a new generation of buyers and sellers from different cultures. If we expect to serve the needs of these potential customers who come from other backgrounds, we must learn those values, customs and needs. All of this bodes enormous opportunity for those who embrace the change and recognize the need to recruit agents from different backgrounds, to customize services for these different cultures, to engage with them online and in the community, and to provide services in different languages.
LeadingRE has jumped into globalization in terms of both coverage and culture. Comprised of 550 strong, independent brokerages with 4,000 offices and nearly 130,000 agents, the network is now operating in 63 countries and expects to hit 70 by fall 2017.
Leading that charge is EVP of Global Operations Christoph (Chris) Dietz, based in London and Frankfurt, Germany. Since joining LeadingRE five years ago, Dietz has expanded the network’s country count by more than triple, but even more significantly, he is continually reinforcing a global mindset that goes beyond coverage.
“In Europe—simply because of geography and other factors—we cross borders all the time and have a sense of the different cultures and practices,” Dietz says. “That is not the case in the U.S., so we are always thinking of the little things…having +1 before U.S. phone numbers for international dialing, scheduling multi-audience calls or webinars involving overseas colleagues at times that make sense, reviewing messaging intended for all members so that it isn’t so U.S.-centric.
“But the best way for that kind of thinking to be natural is to experience other cultures,” he continues. “At LeadingRE, we are very focused on connecting our members, not just having dots on the map. That way, we form trusted relationships based on mutual understanding and respect, and we find that at the end of the day, people are people. If we know each other, we are more likely to do business with each other.”
To foster these cross-border relationships, LeadingRE schedules at least two or three non-U.S. events each year in addition to its annual “Conference Week,” held last month in Miami with members from 25 countries in attendance. In 2016, the network’s annual Global Symposium was held in Amsterdam, and a luxury property event for its Luxury Portfolio division took place in Beijing. Regional networking webinars for members in the Caribbean proved so popular that they are being replicated in Europe and other regions this year. In 2017, in addition to its Global Symposium in Vienna at the end of September, a variation of its highly lauded “Asia Immersion” event in Shanghai in 2014 will be repeated in Kuala Lumpur, Malaysia, with pre- and post-event visits to Singapore and Thailand.
“There is an enormous sense of comfort when gifting a client to a LeadingRE/Luxury Portfolio colleague in another part of the world,” says Lulu Egerton, a partner with London-based Strutt and Parker in the UK. “Even if we haven’t met a particular member, we know that these companies have been carefully vetted and share our values.”
For example, when Egerton’s team identified Turkey as a source of investor buyers coming to London, they reached out to LeadingRE/Luxury Portfolio member AYIKCAN Real Estate there, who organized a dinner with high-net worth Turkish business people during a Strutt & Parker visit to Turkey.
“That kind of thing lays the groundwork for relationships that inevitably lead to business transactions,” says Egerton, “and this simply wouldn’t happen without the connections fostered by LeadingRE and Luxury Portfolio.”
As the frequency and participation in LeadingRE’s global events have grown, so have its cross-border referrals. Member-to-member referrals are a core competency of the network dating back to its roots in the old RELO® network. Last year, members generated over 30,000 “client introductions” to one another with a whopping 50 percent conversion rate. Traditionally, most of that has been within the U.S., but cross-border referrals are doubling each year, and conversion is improving thanks to a “Cross-Border Liaison Team” that assists members with communication, customs, and follow-up required by referrals between different countries.
One recent success came with a referral from Smith & Associates Real Estate in Tampa, Fla., to Stone Real Estate in Sydney, Australia. Smith & Associates Vice President of Business Development and Relocation Jane Gowarty made an introduction on behalf of REALTOR® Amanda Heese, whose godmother had a distinctive property in the Blue Mountains of Australia.
With assistance from LeadingRE’s cross-border team, Heese connected with Reece Coleman, CEO of Stone Realty. “Immediately, I felt confident that Reece saw and appreciated the ‘story’ behind the property and would be a natural at marketing and selling it,” Heese says. The connection between the two companies was further solidified when Gowarty and Coleman met at LeadingRE’s Global Symposium in Amsterdam. A few months later, the property was sold just 10 days after being listed, in a market with an average days-on-market of 360—also setting a new residential price record in the area.
“It was an absolute delight marketing this property and getting to know and work with our LeadingRE colleagues,” says Coleman. “While we are literally on opposite sides of the world, we are aligned by a shared focus on delivering an exceptional experience, and this focus on quality is a universal trait of LeadingRE firms.”
Another globalization focus for LeadingRE is on the corporate relocation side. Its sister relocation management company, RELO Direct®, Inc., works with multi-national clients who relocate talent all over the world. As a result, in Shanghai and Munich, RELO Direct works via two firms that are also members of LeadingRE. These two companies operate both destination service companies (DSPs) to assist international expatriates moving from one country to another and real estate brokerages.
“The organization has synergies for us in both areas,” says Dima Lorenz of Ark Properties in Shanghai. “We work closely with RELO Direct to assist employees relocating to China with RELO Direct client companies, but we also work with fellow LeadingRE colleagues to support individual buyers and sellers.”
LeadingRE is expanding its referral business to also encompass commercial referrals, working with its members who operate dedicated commercial divisions as well as selected commercial-only partners in other cities. Given the growth in commercial investment in the U.S. in recent years, that is yet another way in which LeadingRE plans to extend its global reach.
“While the stock market is hot right now, investors are always looking for ways to diversify,” says Rossell. “Not only are financial advisors considering the real estate portfolio of their clients in addition to equities and other investments, but we’ve also seen growth in global real estate mutual funds and global real estate investment trusts (REITs). Additionally, we see consumers in other countries ‘parking’ their money by buying property in the relatively safe economic environment of the U.S. All of this indicates the fascination with and confidence in real estate from an investment, as well as lifestyle, perspective. As we continue to see an accelerated interest in cross-border real estate purchases, the traditional barriers to these transactions—financing, logistics, and more—will be increasingly minimized, so that buying or selling property in another country becomes nearly as routine as it is in the U.S.”
LeadingRE truly lives its mantra: “We’re Local, We’re Global®.” Its locally-branded independent real estate firms have to be market leaders in order to qualify for membership, whether a mega-brokerage like Howard Hanna or Long & Foster or a one-office firm that dominates the market in its small suburb or town. No matter what a firm’s local profile, having meaningful connections to other quality-focused firms worldwide is a real differentiator in this global economy.
This local “private label” character of LeadingRE’s members is serving them well in the age of the internet and today’s consumer interest in community roots and distinctive business personas. It is no accident that the love affair with local brands is driving many business decisions, whether it is the introduction of boutique-brand divisions by major hotel chains or the decision by HomeServices of America to retain the local brands of independent acquisitions like LeadingRE members Kentwood in Denver and Houlihan Lawrence in Westchester County, rather than moving them into its Berkshire Hathaway franchise network.
“We believe there has never been a better time for local brands,” says LeadingRE’s O’Connor. “Ironically, this translates in the global landscape, as well. In effect, we are able to offer the authenticity and connections of strong local brands around the world. When clients understand that they are accessing the same integrity, competence, and client care in another country that they’re used to at home with one of our members, this becomes a huge factor in bridging cultural, political and economic differences.”
So regardless of where you sit in the real estate world, why should you care about global?
- National economies are increasingly intertwined, and when business crosses borders, so do people and the homes they buy and sell. As that happens, the barriers to real estate transactions will fall.
- The internet and smartphones have introduced new vistas to consumers everywhere, particularly with younger people, so those who have never thought about buying a home in another country are or will.
- You already have a host of cultures in your own backyard, and if you wish to have their business, you need to know them.
Having a global mindset does not mean abandoning love or loyalty to country; it simply recognizes the changing world in which we live and the many reasons—business, practical and personal—to respect and embrace the rich opportunities that diversity brings, just as it has in this country throughout our history.
For more information, please visit www.leadingre.com.
Maria Patterson is RISMedia’s executive editor. Email her your real estate news ideas atmaria@rismedia.com.