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Long Island residential real estate market: Survival of the biggest

Long Island Business News, Jul 20, 2007 by Long Island Business News Staff

There's blood in the water, and the big fish are hungry.

With housing sales slumping, brokers say the Long Island residential real estate market - which was already highly competitive - has become a survival of the biggest. There are simply fewer transactions for the nearly 28,000 real estate agents who work in some 2,942 offices in Nassau, Suffolk and Queens, and as the number of home sales sinks, more small independent real estate companies are being absorbed into expanding chains.

Lynda Baker Real Estate buys neighboring Robin Realty, Century 21 American Homes picks up four new local offices, Cendant Corp. now controls Sotheby's Inter-national Realty, Century 21, Coldwell Banker and ERA - a dizzying pace, and you can't keep up without a scorecard.

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Century 21 Laffey is one of the chains looking to expand. Headquartered in Greenvale, Laffey now has 14 offices on Long Island and in Queens, having recently bought Cove Point Realty in Oyster Bay - a typical small independent with seven agents. Laffey has also bought Eldon Realty in Roslyn, Century 21 Jannace in Hicksville and Century 21 Parkville of Williston Park.

Chief executive Emmett Laffey said such mergers are as good for the small firm as the one doing the buying. "The broker/owner can move into a firm like ours and take total advantage of the millions of dollars we spend to create services and tools," Laffey said. "They can make more money without the headaches of training, hiring, compliance, legal, technology, marketing and all of these issues that cost a fortune."

Another fast growing chain is the family-owned independent Coach Realtors, headquartered in Northport. Coach recently acquired the Sutton Agency in East Islip and now has 19 offices and over 500 agents.

"Expansion is very important to our organization, both organic and through acquisition," said Lawrence P. Finn III, director of corporate services for Coach. "To be successful in today's real estate industry, you have to offer your sales associates all of the services and tools that they need - and you have to be large to do it properly."

A few years ago, Coach merged two old-time Garden City independents, Hubbard & Klapper and Fennessey Realty, into its company, and Finn said the 40 agents there made it the largest real estate office in the village. When considering locations for expansion, Finn said he looks at an area's average sale price, the number of transactions it supports, the ability for growth and the competition.

Despite all this growth, the prospect of starting - and staying - small hasn't kept hundreds of new independents from going into business. "The independent offices have exploded in the last three years," Laffey said. "I think there are more real estate offices here than gas stations."

Being small has its limitations. "They - rely on their sphere of influence for business," Laffey noted. "Companies like that have a tough time building new business because they come up against companies like mine and other major firms that offer such a greater spectrum of services that they don't.

"If you're selling your aunt's house or your best friend's house, they'll overlook what services you don't have," he added. "That's how they stay in business."

Larger companies also point out that getting rolled into a more substantial organization isn't an end game. "It's just the natural progression of the industry," Finn said. "In the '70s, there was no such thing as a multi-office operation. There were one-office companies in every neighborhood."

Coach has been a target of larger firms for years, Finn acknowledged, but he affirmed the company is not for sale.

Meanwhile the feeding frenzy for small independents should continue. Laffey said the environment for mergers and acquisitions is probably going to be at its greatest in 2008 and 2009.

"The bottom line is the agents that are in these small mom-and- pops will be lost in the shuffle," Laffey said. "I wouldn't be surprised if 25 percent of the current operations with less than 10 people are interested in selling or being acquired."

Long Island residential real estate market: Survival of the biggest

Long Island Business News, Jul 20, 2007 by Long Island Business News Staff

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