The real estate market has become much trickier for brokers in the past 12 months. Now comes the news that a major U.S. competitor is planning to expand into Germany. Sven Odia, CEO of the German market leader Engel & Völkers, discusses growth in the face of dwindling revenues and new challenges.
Mr. Odia, there is talk in the industry that one of the world’s largest real estate firms – Keller Williams based in Austin, Texas – is preparing to enter the German market. What are you going to do to defend Engel & Völkers’ position as market leader in Germany?
Odia: The news that Keller Williams is coming to Germany doesn’t make us uneasy in the slightest. Their market entry won’t have any impact on the development of Engel & Völkers – not even in the medium term. We’re investing in the professionalisation of our company on an ongoing basis, all with the aim of building further on our market leadership. Safe in the knowledge that we are the leading platform for real estate agents, we’re not worried about the arrival of one more market player.
With around 16,500 people working under the brand, Engel & Völkers seems large from a German perspective. But it is dwarfed when compared to Keller Williams, which has some 200,000 employees according to its own figures. Isn’t this U.S. giant in a position to simply take over the German market?
Keller Williams is a very major player – but it operates in a completely different market segment. Its focus is firmly on high-volume business – while we are specialised in the premium segment. Our clients don’t just partner with us once. They use our services when dealing with a transaction on their own private home, for example, then return when buying a holiday property, and reach out for more advice when acquiring a property for capital investment purposes. Keller Williams has a different focus.
In what ways do your business operations overlap?
We overlap primarily in the U.S. and Canada: New York, Chicago, Vancouver, and the top ski resorts in North America, for instance. One major competitor of ours in such places is Sotheby’s International, for example. It’s interesting to note that Sotheby’s generates around 90 percent of its revenues in its domestic market of North America and just ten percent in Europe. Engel & Völkers, by contrast, has evolved into a real global player.
“Workin’ Mom” Jessalyn Wanlim now works for Engel & Völkers
Could you elaborate on that?
We generate about half of our turnover in Europe and half in North America, respectively. We have some 5,500 agents working under the brand in the U.S. and Canada, based in 280 shops. Overall, they brokered real estate in 2022 worth 23.5 billion euros. The spotlight is on us right now in North America as the Canadian actress Jessalyn Wanlim – of “Workin Moms” fame – has been working as a real estate agent for one of our licence partners in Nashville, Tennessee, since last year.
What role have Sotheby’s and other U.S. companies played in Germany up until now?
Other U.S. real estate companies like RE/MAX, Century 21, Coldwell Banker, are not yet as present on the German market.
Why is that?
One reason is the labour market. Corporations in the U.S. can access a labour pool of 1.3 million qualified brokers who hold an officially recognised “Real Estate Salesperson Licence”. The required qualification is similar across all states, making it easier when it comes to hiring new staff. In Germany, on the other hand, anyone with a general licence to trade can call themselves a real estate agent. To ensure a genuine quality standard, companies have to train staff themselves – just as we have been doing for many years in our long-established Engel & Völkers Academy.
Why is Keller Williams coming to Germany at this particular point in time?
That is something you’d have to ask Keller Williams. I heard several years ago that Keller Williams was looking to open a subsidiary in Germany. In essence, the German market is an attractive one. And the home ownership ratio, at just 50 percent, is low by European standards and could be seen to have potential for growth.
Even some major players won't be able to hold their own on the market
If not the luxury segment, should the more mainstream segment of the brokerage sector be fearing the arrival of the Americans?
In my estimation, many smaller-sized competitors and even some larger players do have much more to fear from the wave of consolidation that is making its way towards the German market. Some brokerage companies, including the new prop tech start-ups that have emerged in recent years, will find it challenging holding their own in the market over the next few years. The industry has become more challenging. In past years, there having oftentimes been four to five serious prospective buyers for every property. Now there are usually just one or two. There is a great opportunity here for us though.
An opportunity for takeovers?
We’re focused on expanding our existing network for now, but I wouldn't want to rule out any acquisitions in the future. We are the number one address and an appealing brand for agents who no longer see a promising future ahead if they stay with their previous employers or licensors. Sellers will also start to think twice about which brokerage company is in the best position to sell their properties with the best possible outcome and highest return. With the formidable reputation of Engel & Völkers, I’m confident that we will continue, as market leader, to make substantial gains in our property portfolio in 2023 and make headway in gaining further share of the market.
So you’re planning further expansion. How fast-paced will that growth be?
In terms of the number of agents in our network, we plan to expand by around 1,000 agents in 2023 – at the same rate as in the previous year.
Your workforce is growing – but your performance results are stagnating. The 16,500 people working under the brand generated as much turnover in 33 countries in 2022 as they did with just 15,500 people in 2021: 1.26 billion euros. So revenue per head has fallen by around six percent. Is that good enough for you?
We invested heavily in the expansion of our international network last year and opened 53 new shops in total. The Group’s turnover result reflects the difficult market situation of recent months – but we are very satisfied to have matched the same financial result as in 2021, which was a boom year.