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Monopolistic Disintegration

Posted by Chrles Pence on January 6, 2014
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What a difference 35 years makes. I began my real estate career in 1978, in Santa Monica. At that time there were 321 real estate offices or brokerages from Hollywood to Malibu, mostly “Mom and Pop” shops. Today I would be surprised if that number is 100, including all the offices of mega companies. There were 12 companies with two or more offices and eight companies with five or more offices. Two of those companies were franchisors, Red Carpet Real Estate and Century 21 Real Estate; they were also the
two largest companies on the Westside with 12 and 13 offices respectively. 5186734191_eb1c7706bc_m

Over the next 15-18 years many of these smaller offices either went out of business or were amalgamated by John Douglas Company, Fred Sands Company or Prudential Realty. Over the last 10 years or so those three companies were horizontally integrated by large money management companies. Most of those early companies, from the 1970’s, 1980’s and into the 1990’s were family or individually managed companies. As the conglomerates gobbled up the large and small real estate companies, the real estate structure became more corporate and less client focused. I think the real estate environment became more about corporate profit and less about client services, and more incumbent upon the individual agents to provide client services.

Thus, we had the beginning of the current “horizontal disintegration” or “monopolistic disintegration” of the real estate industry. Agents began leaving the large conglomerates for smaller more nimble companies, companies that were more service oriented and consumer friendly. Many of these new companies are at the head of the class when it comes to the digital age and social media exposure. The large companies don’t understand that it is not enough to just create a digital platform for their agents. Agents are independent contractors running their own small businesses and need staff to be a real participant in the digital era, consequently very few agents are really engaged in social media, digital marketing, managing a website, etc.
Conversely, some of the new smaller companies have organized a way to help their agents in this realm. For instance, Partners Trust Real Estate Brokerage and Acquisitions, has a digital/social media department with three full-time employees for their 105 agents.

A few years ago a past president of the California Department of Real Estate, Tim Corliss, told me that it was no longer the 80/20 Rule, (80% of all real estate transactions are being done by 20% of the active agents). He said that it was now more the 92/8 Rule, (92% of all transactions are being done by 8% of the active agents). With the horizontal integration of the real estate business and the market downturns over the last ten to fifteen years, agents have found it necessary to build teams to become more productive and effective in their service to their clientele.

Another big change in the Westside real estate market over the last 35 years has been the prices of homes. On June 17, 1978, the two most expensive houses located north of Montana in Santa Monica were listed for under half a million dollars. The first one was 500 25th Street; it was listed for sale for $465,000, on a 14,500 square foot lot, with five bedrooms and three baths, a guest apt, library and room for a pool. The property taxes were listed at $6,321. Another home at 226 Palisades Avenue was listed much higher at “$485,000”. It was a two story English home with four bedrooms and three baths, a maids room, and bath, guest apartment, tennis court, a 17,500 square-foot lot with a property tax bill of a whopping $4,600 annually. Oh, and it was also available for lease at $2,500 per month. At the same time, if you want to live on the beach in Santa Monica, you could buy 972 Palisades Beach Road. It was listed for $585,000, three story Villa, six bedrooms, and five bathrooms, two guest houses, furnished, with a property tax bill of $4,100 annually. If you were really in the chips you could live on the beach at 625 Palisades Beach Road for $1,590,000, in a two story Villa with six bedrooms, six bathrooms, maid’s with bath, two story guest house, on a 17,390 square foot lot with a hefty tax bill of $12,000 annually. You  could also live at 1725 San Vicente Boulevard for $1,590,000 which had five bedrooms, five baths and a maid’s with bath, overlooking the Riviera Golf and Country Club on over an acre of land with a tennis court and Jacuzzi.

As you can see not much has changed in the last 30-40 years, same old, same old.

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