01/30/2013

Avison’s Expansion Model: Tortoise, Not Hare

Avison Young is determined to build a national capital-markets platform in the U.S., but on its own timetable.

In 2009, when the Canadian firm decided to enter the U.S. market, it established a five-year plan for setting up a full-service commercial real estate brokerage. That plan deliberately gave a lower initial priority to institutional property and loan brokerage, while focusing on leasing, property management and other services.

Earl Webb, who was recruited from the top capital-markets post at Jones Lang LaSalle to oversee Avison’s U.S. operation, said he is intent on building a solid foundation before trying to take on the established investment-sales giants. “Look, I’ve competed with Eastdil and Holliday my entire career,” he said. “And that’s not something I want to go head-to-head with until I’m sure we have a good chance of winning.”

Avison’s approach differs from that of the three other upstart brokerages seeking to establish national full-service platforms. Those rivals — Cassidy Turley, Colliers International and Newmark Grubb — have aggressively sought to build out their capital-markets operations in tandem with leasing and other services. This article is the fourth of a five-part series examining the progress of the upstart firms.

Avison initially downplayed capital markets in part because leasing, property management and tenant representation provide steadier revenue streams. The brokerage also believed a focus on those services would give it a better understanding of local markets and help it establish client relationships — both of which would help it win assignments to broker properties and loans.

Since 2009, Avison has made significant strides to setting up a full-service U.S. brokerage, opening 28 offices in 21 markets staffed by about 500 people. At first there was only a token number of capital-markets pros in a handful of key markets. But the company has started stepping up its emphasis. Avison now has about 50 U.S. investment-sales brokers, 70% of whom were hired in the past year. They now generate 15-20% of national revenues. The goal over time is to increase the number of specialists to “well over 100” and the capital-markets share of U.S. revenues to 30-40%, Webb said.

The Toronto company, which bills itself as Canada’s largest independently owned commercial real estate services firm, was formed in 1996 by the merger of two brokerages, one of which dated back to 1978. Overall, the company has about 1,100 real estate professionals, including more than 450 brokers.

Under its five-year U.S. expansion plan, Avison initially established “hub” offices in eight key cities — Atlanta, Boston, Chicago, Houston, Los Angeles, New York, San Francisco and Washington. It then turned to opening smaller “spoke” outposts in cities near the hub offices.

Avison has expanded primarily by acquiring regional boutiques, especially ones that specialize in leasing and property management. In 2010, it bought Appian Realty Advisors of McLean, Va., and Hodges Management and Leasing of Atlanta. In 2011, it purchased Millennium Realty Advisors of McLean and Ramsey-Shilling Commercial Real Estate Services of Los Angeles. Last year, it took over Realty Management of Bethesda, Md., Landry & Associates of Las Vegas, Starrpoint Commercial Partners of Los Angeles, Walsh Co. of Morristown, N.J., and Thomas Linderman Graham Inc. of Raleigh. And this month it bought Mason Partners of Houston.

Avison has also been selectively recruiting individuals and teams. The company thinks it has an advantage on that front because, unlike most of its rivals, it typically offers the heads of capital-markets teams the chance to become principals in the company and participate in profit-sharing.

Most notably, Avison lured longtime Cushman & Wakefield executive Arthur Mirante into the fold last April as president of the New York metropolitan area. Mirante was Cushman’s chief executive for 20 years, during which time he expanded the brokerage’s U.S. footprint to more than 170 offices, from 60. Since 2005, he had served as Cushman’s head of global development.

In October, Avison recruited three former members of Jones Lang’s Boston capital-markets teams — principals Michael Smith and Scott Jamieson, as well as vice president Brandon Dickason. Former Grubb & Ellis broker John Pinjuv, who is based in Nevada, joined last March. Over the past two years, capital-markets pros were also added in New York, Los Angeles, Houston and Florida. At the top of the recruiting list for this year are San Francisco and Dallas.

Webb said Avison will eventually seek to compete head-to-head with the market giants for assignments to broker large properties and loans. But not yet. For the time being, the company is concentrating on listings of less than $25 million and on building relationships with local and regional owners.

“We’re focusing on private capital, regional assignments on both the buy side and sell side, migrating business out of Canada — growing at our own pace,” he said.

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