How Consolidation is Shaping the Real Estate Landscape
Big firms are increasingly absorbing smaller ones, but “it’s still a relatively fragmented industry” — which presents both opportunities and challenges.
Key points:
- While the industry has seen “more and more consolidation around the bigger brands,” there are still plenty of opportunities for investors and smaller firms.
- What makes a brokerage an attractive M&A candidate? Strong leadership that has built “a strong culture, a strong brand.”
- MLSs have achieved meaningful consolidation over the past decade, but “resistance to change” remains a challenge for that side of the industry.
If it seems like the big are getting bigger in real estate, that’s because they are — which makes competition more expensive and scale more important than ever.
But a look beyond the numbers reveals the complex forces driving brokerage and MLS consolidation, and a foundational truth: Real estate is “still very much a people business,” said Gavin Swartzman, newly retired CEO of Peerage Realty Partners.
Swartzman and Matt Consalvo, CEO of Arizona Regional MLS, tackled the topic of consolidation earlier this month in the debut episode of a new series called Ask T3 hosted by Nick Bailey, chief real estate officer at T3 Sixty and former president and CEO of RE/MAX and Century 21. (Note: Real Estate News is an editorially independent division of T3 Sixty.)
As firms look to grow via consolidation, culture counts
Of the 100,000 or so real estate brokerages in the United States, the three largest — Compass, Anywhere Advisors and eXp — accounted for over 17% of the industry’s total sales volume in 2024, or more than $570 billion. Expand out to the top 10% of brokerages, and you’ve accounted for 42% of total sales volume.
It might seem like things are pretty well consolidated already, but “it’s still a relatively fragmented industry,” Swartzman said, which spells opportunity for investors or private equity firms. And “after three years or so of record-low transaction sizes, the valuations are becoming much more reasonable.”
But it’s not just about numbers. This is real estate, right? There are the “three L’s” to consider. And in this kind of situation, Swartzman said, the smart money isn’t attracted to “location, location, location,” but “leadership, leadership, leadership.”
“You can look at all the objective measurements like retention and margins and all those things, and everybody wants them to be better than average, which is the byproduct, ultimately, of leadership,” Swartzman said. “If you’ve got a strong culture, a strong brand, you’ve got a great market differentiator.”
There may come a day when there are just 25,000 brokerages in the U.S., but “that will take a while,” Swartzman said. “We’re definitely seeing, you know, more and more consolidation around the bigger brands. But there’s room in this industry for whatever is your natural way of doing business.”
MLSs are stronger together, but ‘not overly friendly with each other’
A decade or so ago, the U.S. had more than 900 MLSs. Now there are just over 500. “So we have made strides,” Consalvo said. Arizona has already seen a 10% drop in its number of MLSs, going from 10 to nine when the Sedona Verde Valley MLS joined ARMLS earlier this year, he added.
“I do believe that there is a lot of resistance to change,” Consalvo said. If you’re “hobbying an MLS, it’s time to let somebody build a great MLS and support you in that.”
Support doesn’t necessarily mean a merger, acquisition or takeover. “You can partner and do things locally, but have the scale of some of the larger folks by being friendly,” Consalvo said. “That’s the challenge of MLSs. We’re not overly friendly with each other when we bump into each other.”
Does Consalvo think more MLSs will be sold, a la REcolorado? “I’m astonished that deal came together,” he said, in large part due to the unusual nature of the business, which requires completeness of data.
“We don’t own our product,” he said. “Our product is linked to us by our brokers, and we have to be highly respectful of that relationship. We have to operate the MLS in some ways more like a cooperative than a business, because if we offend those data creators, they could take their data and go to a different place.”
Enjoy this article? MetroTex members can subscribe to Real Estate News at no cost and stay informed on crucial industry insights! Subscribe Now