Top Markets for Brokerage Expansion

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Amid the economic uncertainty and paucity of deals, some commercial brokerage companies are conducting layoffs and closing some offices. On the other hand, some firms are finding now as good of a time as ever to expand their national footprints.

There are a variety of factors that weigh in on expansion decisions. “Even when there is uncertainty in the market revolving around interest rates, inflation and the possibility of a recession, the opportunity for strategic growth remains,” Otto Ozen, executive vice president of The Mogharebi Group told Commercial Property Executive.

Specializing in multifamily investment sales, The Mogharebi Group is considering new markets that will satisfy clients’ current needs, whether that be potential for improved yields or safety and wealth preservation.

READ ALSO: CRE Brokers Power Through Decline in Deals

On the commercial side, quality brokerages can easily expand to new markets, according to Matthew Stearns, senior managing director, head of Originations with Black Bear Capital.  

“It’s a great time to (expand) because sponsors need brokers/advisors more than ever given all the market dislocation,” said Stearns. “Things are changing so quickly that it’s important you take deals out wide to the market.”

Further, in difficult times, competition amongst advisory firms stiffens, and there is an obvious bifurcation in quality. Stronger firms have a greater opportunity to grow while weaker firms may close up shop.

Which markets exactly?

Black Bear is looking to increase their presences in high-growth markets in the Southeast and Southwest regions, followed by possibly the Northeast and Midwest, Stearns explained.

Stream Realty Partners has entered into three new markets in the past two years, most recently opening a Miami location in January.

“We are really focused right now on making our three newest markets (Nashville, Phoenix, and South Florida/Miami) thrive,” said Derek Land, head of new markets and partner at Stream Realty Partners. “That doesn’t mean we aren’t eyeing a few ideas/markets for expansion down the road. But we are super excited about the new markets we have just entered.”

On the multifamily side, The Mogharebi Group recently added offices in New Mexico and Nevada.

“We are looking to expand in markets that have a void we can fill, targeting those where we can build solid partnerships with advisors who are market leaders,” said Ozen. “Markets we see as potential expansion opportunities include California feeder markets and emerging markets with promising economic growth in states such as Arizona, Texas, Florida, Colorado and Idaho, among others.”

The reasons behind expansion locations

While there are many reasons a brokerage may choose to expand to a certain location, the common denominator seems to be population growth. In places with a negative migration pattern, obtaining financing or gaining market share can be exponentially more difficult and less profitable.

The main reason Black Bear is keen on southeastern and southwestern regions is due to this very phenomenon, Stearns stressed.

“There is still a substantial migration pattern from many of these high-tax and high-crime states/cities into more favorable states as it relates to taxes, crime and quality of life,” he said. “Follow the money and it’s clear where most folks want to park money on deals.”

Where clients want to put money is a top priority among various property types, asset classes and CRE markets. Ozen explained that when considering where to put boots on the ground, The Mogharebi Group follows its clients’ capital.

Along with population growth, Stream Realty Partners also looks at markets where their full-service platform is most effective. “It’s important for us to use our robust service platform, along with our development and acquisition platforms, to grow local offices strategically,” said Land. “See Nashville, Phoenix and South Florida. These areas have great population growth and plenty of land/space to grow.”

Stiff competition

Not all brokerages have the capability to expand given the current CRE climate. The goal is to maintain and grow the best client services possible. Expansion is just one of the many ways brokers are getting ahead of the competition.

“Since we are privately held with no corporate debt, we can be aggressive while some of our competitors are cutting resources,” said Land. “It’s simply offense vs. defense.”