Colliers International is celebrating 20 years in New Zealand. Like the first days of the business in 1989, times are tight. However, the Colliers proposition is much stronger now than in those fledgling days.
An Australian-founded brand, Colliers was barely a decade old when it started in New Zealand in 1989. Observers could be forgiven for thinking the company had got it wrong: the property market was at an all-time low following the 1987 share market crash, many high-fliers had either dumped their property assets or left the market altogether and New Zealand was in a worse shape than most western economies.
Then along came Colliers International. From the outset it was obvious Colliers was not just another property services company. The culture that had led to the formation of the group in Australia a decade earlier was to have a lasting effect on New Zealand.
Colliers used the latest technologies and work practices. This included moving away from the traditional office setup – then rigid, compartmentalised workspaces and offices – to open plan. Twenty years later, Colliers is a leader in what it describes as ‘collaborative’ office space, which includes a Vodafone wireless office set up that combines landline, mobile and computer to enable staff to work seamlessly - either at their desks, in meeting rooms, client areas or away from the office.
As Mark Synnott, Managing Director of the firm for the last fifteen years, says: “When I took on the role, the senior managers were all hidden away in offices. One of the first things I did was take out the offices, as I felt that there was just not enough collegiality. The move helped immediately to create a team atmosphere and promote cross-team interaction.”
As New Zealand emerged from the property gloom in the mid-1990s, the company grew rapidly, transforming into one of the most successful of Colliers’ international operations. This was only possible through a major strategy refocus. “When I started running the company in 1994, Colliers had 140 people in New Zealand,” says Mark Synnott. “Auckland and Wellington had just seen CBD vacancy rates of 30-35%, so we spent the first 2-3 years driving the profit line. We cut ourselves back to basics: less people doing more business .We went from 140 people down to about 100 within 18 months.”
Synnott cites the doubling of the company’s Wellington office size through a merger with Harcourts in 1999 as a defining point in the development of the company’s franchise model, which has been in many ways the catalyst for all subsequent growth.
“We decided to grow the company aggressively at the beginning of 2000,” says Synnott. “We sat down and said: ‘Right: Let’s give it a real nudge.’ Revenue jumped up by about 30% over that first year and, despite dips in 2001 and 2008, it has grown at a compound rate of 18% per annum. Since 1994, the company’s revenue has grown by a factor of six.”
The franchise model is at the heart of Colliers’ development. When the decision was taken to drive Colliers’ growth, the senior leadership team’s objective was for the company to be in all major centres of population of over 100,000 people and partnering with the right people. “The only exception we made was Queenstown, which is smaller,” says Synnott, “but it is a place with a core of high net worth individuals. The Colliers brand is in the right position there, with the right franchise partners.”
Christchurch – Colliers’ first franchise – was founded as a joint venture in 1992 by Hamish Doig. The office has boomed, taking the lion’s share of commercial property deals in the city and distinguishing itself from other agencies by its concentration on sector specialisation.
“We’re now at 13 offices,” says Synnott, “which is a lucky number for us. Expansion has driven our continued revenue growth, even in more difficult market conditions. Although 2008 was a bit of a dip, we grew our South Island presence dramatically, opening new Nelson and Queenstown offices, taking a majority stake in Livingstones Property Management and, through them, the Fright Aubrey valuation business. In doing so, we grew our South Island business by three times in the last 24 months and built strong new foundations for future growth. The Dunedin office we opened this year is in the last major market we need to be in: we now have a network that covers the entire country.”
The secret to the company’s success according to Synnott has always been attracting – and keeping - high-calibre professionals. “A major differentiator for us is that we have a lot of people who have been here a long time. I have been here for 20 years and I really enjoy the camaraderie; it is an extended family, a social network of people who are great at building relationships, both within the company and outside it.”
This atmosphere is the platform for a genuine sense of team that exists within the company. “Teamwork is the bedrock of our success and a key element that gives an edge. Our leaders have grown up in the team culture: the majority of our product line directors have been with us for over fifteen years.”
Andrew Stringer, the newest member of the senior leadership team, joining in late 2008 to head up the national valuation business, refers to the “consistency of the senior leadership team that stands the business in great stead. The Colliers way is that two or three minds are better than one: that way clients get better value.”
Colliers combines its team approach with diverse sector expertise. At the heart of Colliers’ approach to business is flexibility. For example, when the property market weakened in 2007/08, Colliers expanded its corporate recovery work into a significant revenue source.
But then Colliers has been through this before. At a time when many listed property companies are posting sizeable first quarter losses, Synnott is keen to emphasise that Colliers’ horizons are altogether higher, working to maintain momentum and morale. “I am the only agency MD who has seen this sort of blood and guts market before. Therefore, Colliers hasn’t panicked. We are the most robust of all the commercial real estate firms, with a good balance of brokerage and professional services revenue. We’re in good shape and we’re still growing, adding high quality people and offices to the team.”
“In fact, we made an announcement this week that Mark Parlane and Russell Clark, two highly experienced and acknowledged experts in industrial and commercial valuation, are joining our Valuation and Consultancy team in Auckland. The addition of these two people will allow us to take a further step in our ambition to be New Zealand’s leading valuation business, reinforcing our already strong market position.”
“Don’t forget also that we are growing our market share at a time while everyone else is pulling back,” he says. “We’re expanding into new markets such as residential project marketing, in which we are experiencing some good success with our Stamford Plaza project. In addition, our professional services business has doubled in size over the past two years.”
Peter Herdson, Colliers National Sales Director, adds: “Although the market is still volatile, interest rates are low. We’re seeing a clean out of over-leveraged developers, which creates opportunities. While there’s no doubt that the market will be more conservative, looking to the fundamentals, opportunities are presenting themselves.”
This is echoed by James Horne, Colliers President, International - Asia Pacific, who visited the Auckland team recently. “This business in particular is very finely tuned to the economy here. It’s got very experienced leadership, people who have been through some very difficult times, and as a consequence it has become very nimble in terms of adjusting its perspective on what it takes to live through something as dramatic as this. I know they will come out stronger than the competition.”
The current environment is not holding the company back. Global recession or not, Colliers continues to be involved in the biggest deals in the market, as Peter Herdson explains. “We have just completed New Zealand’s largest commercial portfolio deal of the year so far, with the unconditional sale of a portfolio of seven prime freehold retail properties in the North Island owned by New Zealand Post. The properties sold for nearly $45.5 million, representing a yield range of 5.38% to 7.6%, averaging 6.5%.”
Mark Synnott also points to the company’s involvement in leasing 80 Queen Street to Deloitte and Bank of New Zealand, plus the redevelopment of Auckland’s Britomart precinct, in which Colliers has been heavily involved through leasing much of the space available to date, including a major new building to Ernst & Young and the CPO building to Maersk Line. “Britomart is the greatest CBD regeneration project underway in New Zealand; a powerful combination of Auckland’s commercial past and a truly dynamic future. I am proud that Colliers is a part of it and that we are able to help Cooper and Company achieve their vision.”
John Goddard, Colliers’ International Sales Director and one of the company’s long term and most senior team members, talks of some of the company’s biggest deals in recent years, including the 10,000m² Ernst & Young lease – the third time Colliers has worked with the firm over a 16 year relationship – and the $200+ million AmTrust Pacific office portfolio sale to Multiplex, the largest private portfolio sale at the time and still one of the biggest deals since the millennium.
According to Goddard, three fundamental drivers mark the differences between today’s market and the period between 1991-95: “Firstly, interest rates in 1991 were 300/400 basis points higher than property yields. As the market moved into forced sales in 1993-95, interest rates remained double digit – 11/12%. At the moment yields are higher than the cost of funding.”
“Secondly, in the 1990s high net worth Asian investors - off the back of a weak NZ dollar, low yields in their own country and spare cash generated from the US tech boom - chased our yields in a localised distressed market. Therefore, New Zealand and Australia ran counter cyclically to the rest of the world and we were comparatively the only ‘cheap market’. Today, financially speaking, investors live in a global candy shop where choice abounds, so we have to work harder to attract the cash that is around.”
“Thirdly, in the 1990s, deposit rates were double digit. Therefore the cost of equity raising was prohibitive. By contrast, current deposit rates are at all time low, so depositors are now seeking higher returns from corporate bonds and property. $1.4 billion of corporate bonds have been raised since January.”
This generally positive view about New Zealand reflects equally on Colliers’ international experience and its extensive research. This did not happen by chance. Colliers’ exacting research - what it calls its ‘wealth of local knowledge’ - underpins much of its strategic direction, forms the basis for the company’s ‘Our knowledge is your property’ slogan and gives the company’s managers the confidence to weather storms like the global credit crunch. This, in turn, provides prospective investors with the confidence to buy, lease or raise capital.
Colliers also listens to clients, reporting trends and developments in the marketplace, providing a reality check on the state of the property market. For instance, Synnott notes that clients demand better quality than they did 20 years ago. They want buildings to be greener and more efficient. “There is,” he says, “a flight to quality.”
Twenty years on there are no regrets from Colliers about putting its stake in the ground in New Zealand. Its team is working harder than ever in the present challenging economic climate but the fun and passion remain.
However, there will be no big 20th birthday bash. “No, no celebration,” says Synnott. “We’re saving up for our 21st birthday, when we will really come of age.”
It is, quite simply, business as usual.
Auckland-based journalist and author Graeme Hunt contributed to this article
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