The following is an extended version of an interview that ran in the December issue of Real Estate Forum.
As we close out one year and enter another, most of us have a list of resolutions, goals, plans and expectations, be it business or personal. For industry associations, a new year also ushers in a new roster of leadership to direct their respective fields and address the issues most relevant to their businesses.
It’s true for the Society of Industrial and Office Realtors, the Washington, DC-based association of top-performing commercial real estate brokers around the world. The organization recently held its Fall World Conference in Los Angeles, where it introduced its 2012-2013 president, Terry E. Smith, who is an executive vice president and partner with Colliers International in Nashville.
At the event, Real Estate Forum editor-in-chief Sule Aygoren Carranza caught up with Smith and Frédéric Schneider—vice president of SIOR’s European Regional Council and member of its International Advisory Council, as well as an advisory specialist with Capita Symonds in London—to talk about the organization, its growth over the past few years and its goals for the future. An edited version of that discussion follows.
SULE AYGOREN CARRANZA: SIOR has experienced significant growth over the past five years, particularly in the global markets. Can you tell us a little about that?
TERRY E. SMITH: The one thing that’s important about any organization is the brand, and the SIOR brand is very strong and stable. Over the past five years, when all the other organizations like ours lost some big numbers, our numbers have remained very stable. As a matter of fact, our real growth has been pretty recent. Five years ago, we didn’t have much of an international presence. Today, we’re in 35 countries and we’re continuing to gain membership globally.
The other thing happening with our brand is we’re really working to diversify. Because SIOR is so strong and admittance is selective—you need to have a certain number of years in the industry and a certain number of transactions under your belt—the average age of our membership is around 54. So one of the things we’re focused on growing recently is our Candidate Program, where younger professionals who don’t yet qualify to be a full member can still get involved in SIOR and see what we’re about, and be associated with the SIOR chapters around the world. That’s taking off and doing well. But we’ve been able to maintain our membership levels around 3,000 for a long time. We’re seeing some great activity now and we’re going to start stepping up those numbers.
FRÉDÉRIC SCHNEIDER: SIOR has been present and active in Europe for probably the past 10 years, but it was very small, five to 10 members, for quite a long time. Around 2005, there was a real effort by SIOR in the US to grow international chapters because, like every other organization, SIOR needed to become more global and sell the network to a global market. SIOR really wasn’t known in Europe at all. Since then, we’ve seen tremendous growth in Europe from literally five or 10 people to close to 70 members, and growing exponentially every year.
I joined SIOR four years ago and my aim is to grow the European chapter. Not only in the major markets like the UK, France and Germany, but also throughout Eastern Europe, which is a real growth opportunity for SIOR. We have staff through quite a few European countries, and we’ve had great success, particularly in Eastern Europe.
AYGOREN CARRANZA: In what specific markets are you seeing the most opportunity?
SCHNEIDER: Poland, the Czech Republic, Hungary—which to some extent has become the market for industrial growth, in terms of manufacturing and shared services, where a company might set up operations for their European accounting or HR or finance divisions. These markets are open and have an educated labor force, the real estate markets are very cheap and they’re a part of the European Union, so in terms of regulations and laws, they’re similar to most Western European countries.
India is still growing very much, and China is still one of the most important growth markets in Asia. Most of our customers have some sort of operations in China. We’ve also seen growth in some of the other Asian markets like Thailand and South Korea. Growth in South Korea is actually higher than China, in terms of real estate markets.
SMITH: We’ve seen quite a bit of growth in Mexico, where there are a lot of commercial brokers who up until recently didn’t even need to have a license, so there were some real credential problems there. People in that market are now looking for credentials, and SIOR in that market gives them those credentials, because they still have to adhere to a code of ethics and take classes and get certified to become an SIOR.
The world’s getting smaller, but we’re is becoming more important because what you get when you get an SIOR is the very best person in that market that can take care of you.
AYGOREN CARRANZA: Realtors in the US have been navigating through a slow economy and uncertain business climate. Frédéric, how are things looking in the European markets?
SCHNEIDER: It’s not as clear-cut here as in the US. Some markets and sectors have experienced a substantial increase in activity. For instance, if you look at investment activity for prime property, we’re back to pre-2007 levels. So if you’re an investment broker in Paris, London or Frankfurt, your level of opportunity will have increased because everyone’s going after the same product. However, if you deal with secondary markets or secondary product, across the board, the activity has slowed, values have decreased, everything is more difficult and deals take a long time to get done. So really, you’re experiencing a two-tier market throughout all of Europe, where grade A product is getting significant levels of interest, and tier-two product is still having a difficult time.
AYGOREN CARRANZA: So then, what are the biggest overall issues that commercial real estate professionals have in Europe?
SCHNEIDER: It’s really in the way corporates work. Corporations are using less space, which has been a constant trend for the past five years. They want to save money and work more efficiently. Like in the US, you don’t necessarily need a physical office anymore; you can work from anywhere. So companies need less space. It saves money for companies, but it’s not the best thing for the real estate market.
AYGOREN CARRANZA: Are the economic issues throughout the Continent hyped up, or are they a real cause for concern?
SCHNEIDER: Obviously there are concerns over the devaluation of the euro, which could be a very damaging problem. If something were to go wrong, it would have a very damaging impact globally. But the political will is there in the main European countries to do what it required to keep it going and make sure the currency will survive. So while there is danger, there’s also political will to prevent it, so it might be hyped up a bit.
AYGOREN CARRANZA: A big benefit to being an SIOR is the access to a network of brokers. How are your members benefiting from it globally?
SCHNEIDER: For European SIORs, the main benefit to joining is to create connections with the US members, because in terms of international business, most business comes from the US. If you ask most European SIORs what was the main reason they joined the organization, it wouldn’t be necessarily to have more links to the European SIORs, since you don’t really need a European SIOR to do business between countries because it’s happening all the time. It’s really the link to the US, which is actually more important.
SMITH: It truly works both ways. The number of US companies investing outside of the US is huge. If I have a client who’s interested in product in Switzerland, I can just pick up the phone and call an SIOR there. So it’s a tremendous asset for both sides of the pond.
AYGOREN CARRANZA: SIOR also helps to serve as the voice of the industry in the US. What’s on your agenda, Terry?
SMITH: One thing we’re looking at is the fiscal cliff. Hopefully the two parties will get together and decide what’s best for the country, and not what’s best for each party. When they do that, then we’ll get over this issue and move forward. The one thing we’ve got going for us is I truly believe we’ve been in a recession and we’re coming out of it, however slowly. Everywhere I go, it’s the same. In Toronto, for instance, they’re building properties left and right. I’ve never seen so many cranes at work in one city. So if you look at things, there are a lot of markets that are doing extremely well, and things are getting better. There are still some markets where there’s some cautious optimism, but I truly believe we’re on an upswing.
AYGOREN CARRANZA: Does it work the same way in Europe, Frédéric? What are some of the top of mind concerns for your members?
SCHNEIDER: Not quite. SIOR is still very new in Europe and the membership is still small. In Europe, we have something similar to SIOR, which is the Royal Institute of Chartered Surveyors—a UK-based professional organization that has grown across Europe. They’ve become the voice of real estate here. And we at SIOR have been linking with RICS to work together because it has the same voice in Europe that we have in the US.
AYGOREN CARRANZA: Where do you see SIOR—both globally and domestically—in five years time?
SCHNEIDER: Our directive is to grow the organization across Europe, to have SIORs in each major country. Our second goal is diversity—which is also a goal in the US. The majority of our members are white men. While the diversity in Europe is much better, we’re still trying to create a diverse organization across the Continent. The third goal is to become the voice of the commercial real estate industry in Europe, which is why we’re trying to create ties with RICS.
Having a strong international SIOR network would certainly benefit the US brokers as well, because most of their clients have some sort of international presence, so it’s important to demonstrate that the organization has become international and has a real desire to grow globally. So it’s mutually beneficial.
SMITH: SIOR started during WWII to help the US locate industrial properties for the war effort. Here we are 70-something years later, and our association is very strong, and it’s an organization based on relationships. It’s not a network per se, it’s almost a fraternal organization. It’s the most prestigious designation and you’re truly the cream of the crop when you’re a part of it. A lot of young professionals want to be a part of it because they know what it means to become an SIOR. I don’t see us ever getting huge, because we are a very selective organization, but I do see us growing. We’ll be small in numbers, but very productive if you look at our numbers and our influence in markets around the world.