From a small northwestern observatory…

Over at Jones Lang Lasalle’s blog, Ben Breslau (head of America’s Research) discusses the topic of whether small or large real estate firms will dominate the landscape. His thoughts are good, and I won’t repeat or attempt to refute them. Go read for yourself.

My own thinking is that small firms and large firms are most efficient when they occupy different but “interactive” niches. Larger firms (and yes, we’re talking about JLL here — but also REITs and such) do a great job of aggregating, brokering, and managing real estate when it’s fully developed. Smaller firms, on the other hand, are more nimble and agile at the development, redevelopment, and repositioning. These latter functions have a very “local” component, and smaller entrepreneural firms are typically better at that.

The fly in the ointment is money. The big firms have it, and the small firms generally don’t. Prior to the melt-down, smaller firms could dance around this topic pretty well, since there was risk-capital out there, as well as overly-compliant bankers. In today’s world, where cash is king, the larger firms are the only ones that can afford a seat at the table. Couple this with the fact that, for most sectors, “development” is on the back burner, and we get a scenario where the larger firms will dominate for the time being.

Larger firms would be well advised to ignore the devil on their shoulders telling them that they can be everything to everyone. They are great at raising and managing money and managing stabilized properties. They need to aggresively partner with smaller, agile firms at the front end and back end of the property life-cycle for optimal results.