Scarcely had we finished reporting on the arrival of Swiss hybrid broker Neho onto the German market (see REFIRE 219), but news arrives of the market entry into Germany of an even bigger player, Keller Williams (KW) from the USA, the world's largest real estate franchise based on agent numbers.
The Austin, Texas-headquartered Keller Williams is actively in the process of setting up its operations in Germany, under the leadership of experienced hands Swen Nicolaus and Christian Hoffmann. It expects to open its first offices over the coming weeks and months, focusing initially on the BIG 7 markets, and then developing a nationwide presence over the next 5 years.
The company has already been in Europe for some years, with market centres in 16 European countries, including Spain, France, Portugal and Turkey, where it kicked off in Europe in 2013. Around the world it has more than 1,100 offices across 50 regions, with more than 300 of those outside the US and Canada.
It counts more than 200,000 associates or representatives around the world, boosting its claim to be the world's largest real estate franchise. In France, where it launched in 2016, it now has about 3,000 brokers.
The company defines itself as a network broker, emphasising the opportunities for its representatives to access its proven international network. Swen Nicolaus said, "We are taking KW’s successful systems and models, which are based on 40 years of experience and continuous development by 200,000 associates, and making them available to the German market.”
Christian Hoffmann, who will be managing partner and COO in the new business, says the difference between the KW business model and other classical franchise systems is the level of service provided by the company in handling administration, offering its technology platform and - importantly - extensive training and ongoing education.
Brokers can continue to operate under their own names, in contrast to most other franchising businesses, while fees payable to KW are said to be much lower, and more flexible in how they are structured. "In five to eight years we want to have a significant market share in Germany, on a par with or above that currently enjoyed by Engel & Völkers," said Hoffmann. Engel & Völkers is Germany's largest broker network.
"While we know that the golden age of the last ten years is now behind us, there is still money to be made," he said, pointing to demographic trends, the lack of new-build supply, and Germany's notoriously low rate of home ownership.
In a statement, William Soteroff, the president of Keller Williams Worldwide (KWW), said of the German launch, “The continued rapid pace of our multinational growth shows that brokers around the world know how successful they can be at Keller Williams. Germany is not only Europe’s strongest economy, it is also a political pacesetter in the eurozone. And it offers plenty of attractive opportunities, despite the subdued sentiment right now."
Along with Neho, the Swiss hybrid brokerage chain that last month announced its own entry into the German market, Keller Williams is entering the market when existing indigenous big hybrid brokers like McMakler and Homeday have been slashing their payrolls and letting large numbers of staff go, so there will be considerable interest in how the newcomer beds itself into Germany.
The hybrid broker market in Germany has been going through a tough time in 2022, with market leaders McMakler and Homeday drastically cutting back on staff numbers from the second half of the year. Their businesses are based on the same idea as Neho's - through their digital platforms, undercutting the traditional brokers on service and commission.
Both of these companies maintain bricks-and-mortar offices in addition to their digital platforms. The market was also recently joined by other high-profile broker platforms, a number of which - like French group iad Deutschland and American group eXp Realty - have only arrived in Germany in the last eighteen months.
Since the fundamental re-arrangement of broker compensation starting back in 2015, the market has been flooded with new digitally-based business models for matching sellers with potential buyers.
The introduction of the so-called 'Bestellerprinzip' - 'who orders, pays' - in June 2015, changed things in that many owners and landlords were no longer prepared to pay hefty commissions to brokers to move or rent out their properties after the law had changed in favour of buyers and renters. This led to a surge of more than 50 new digitally-based start-ups with matching models to replace the old structures.
Now many of those models are coming under severe pressure for the first time as the market goes into reverse, while the venture capital investors who have fuelled the helter-skelter expansion of these start-ups are now exerting pressure on their charges to cut their cloth to adapt to new realities.
It may well be that many of Germany's thousands of independent brokers - it's one of the very few professions in Germany that does not require years of training to gain a certificate to practice - will increasingly find they have little choice but to sign up to work with one of these digitally-driven new arrivals if they are to have any hope of gaining - and keeping - a toehold in an increasingly competitive market.
