Small firms phasing out of industry

May 19, 1991|By James M. Woodard | James M. Woodard,Copley News Service

Large real estate brokerage firms are growing larger. And many smaller firms are phasing out.

The trend is sparked by the increasing importance of computers in today's real estate operations. An effective computer system is expensive, and it's drawing a line in the operational sand for brokers.

The trend was revealed in a recent survey conducted by the National Association of Realtors. Information was collected and analyzed from 1,800 firms nationwide.

While only 3 percent of all real estate firms had a sales force of more than 50 agents, those giant firms account for more than half (53 percent) of all sales agents.

A decade ago, those large firms accounted for only 38 percent of all sales agents.

There are still many small real estate firms out there. In fact, about 90 percent of firms nationwide are single-office operations. And half of those firms have five or fewer sales associates.

The friendly, neighborhood real estate broker is still in business, and probably will be a permanent fixture in the marketplace.

But only about 8 percent of all salespeople in the industry are now affiliated with small firms, and that proportion is decreasing.

"Clearly, the survey shows that real estate brokerage is becoming an increasingly big business," said Glenn Crellin, vice president of NAR's Economics and Research Division.

He pointed out that much of the growth seen in larger firms stems from two cost-related factors.

Computers, facsimile machines and other high-tech equipment make it increasingly expensive for brokers to set up shop. And the cost of support services for sales associates -- including educational courses -- has been increasing significantly.

One important factor in the real estate brokerage field has not changed during the past decade. Nearly three-quarters of agents still focus primarily on the residen- tial market -- listing and selling homes.

The survey showed that 71 percent of sales associates, in large and small firms, concentrate on residential real estate. A decade ago, it was also 71 percent.

The use of computers was a particularly interesting part of the NAR survey. It showed that 78 percent of real estate firms now use computers. But the way they are used is changing.

"The last time we did this type of survey in 1986, we found that computers were primarily used to access information from a Multiple Listing Service," Mr. Crellin noted. "The recent survey indicates for the first time that the most likely reason a firm has a computer is to manage its day-to-day operations."

Another new trend revealed by the survey related to environmental factors. It showed that the three top liability issues facing today's real estate firms are:

* Ground water contamination.

* Wetlands and other environmentally zoned areas.

* Waste disposal.

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