Sutton Group Realty Services has its eyes on the Ontario market, where the brand is currently under-represented, says its president and CEO Drew Keddy. Ontario, where the company has a market share of five or six per cent, is a priority, he says.
By comparison, in Quebec and B.C., where Sutton has a strong presence, its market shares are 14 and 12 per cent, respectively. The “ultimate goal” for the Vancouver-based company is a 20 per cent share in its markets, Keddy says.
Given Ontario’s size, it makes sense to focus on the province, he says. “We gain one per cent in Ontario, that’s like gaining 10 per cent in some of the other markets.”
Keddy says the long-term goal is to increase Sutton’s market penetration in key markets “because there’s a direct correlation between market share and broker profitability. So rather than spread ourselves thin by trying to get into every market, we want to concentrate on helping our brokers become bigger and stronger in the markets that we’re already in and to ensure that we have sustainable business over the long term.”
In Quebec, the focus is being put on strengthening existing brokerage groups. Last year, Sutton acquired a Quebec City brokerage and merged it with two others to form Groupe Sutton Nouvelle Demeure.
In B.C., where Sutton has acquired a couple of companies in the last few years, the goal is to expand into some of the smaller markets and to take advantage of opportunities for consolidation in the province’s major markets.
Sutton, which has more than 200 offices and 8,000 sales reps, also opened its first office in New Brunswick last year.
Keddy predicts the residential real estate industry will follow the route of commercial real estate, which had a plethora of independent companies 15 years ago, many of which have since left while the big companies have gotten bigger.
Opportunities for growth at Sutton will arise across the country because of aging demographics of brokers and increased regulations and competition, he says.
“I think we’re in for a culling, if you will, of Realtors in the market. If you look at the last decade, the number of Realtors in Canada has increased by 50 per cent and that to me is not sustainable.”
The volume of transactions is slowing and there will be more competition for fewer sales, he says. “You’re going to have people that just can’t make it anymore. And they’ll end up leaving the industry.”
As “frustrated” brokers head toward retirement, “I think they’re going to look for exit strategies and that’s going to present opportunities for companies that have the ability to grow through acquisition or consolidation.”
Keddy also believes Canada’s financial intelligence unit, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), is going to look more closely at the residential industry, which will lead to more brokers leaving the industry.
FINTRAC was previously interested in the commercial industry because of its higher transaction sizes but “with the escalation of housing prices in Canada, we’re becoming visible,” he says. “I believe they’re going to start doing a lot more audits and I think they’re going to make some examples of some people to get people onside. I believe FINTRAC is going to put a burden on our brokers.”
As a result, Sutton recently held FINTRAC training for all of its brokers.
Sutton will invest alongside them to help brokers acquire companies and grow their market share and market penetration, he says.
Keddy, who arrived at Sutton last year after 15 years with Colliers International, says one of his first goals was to put the brokerage’s house in order by making some personnel changes.
He has been putting a focus on culture, which “is really the backbone of any successful organization” and something that takes years to develop. “People want to be part of something good and when they are, they tend to stay.”
Keddy would like to create a culture of inclusion and collaboration, something he admits could take some time. “Brokers by nature, they’re competitive and sometimes compete against themselves. Eventually, I’d like to see them competing together as a single team. We all do better by helping one another.”
To break the trust barrier, Sutton is getting brokers together at events to hear what’s going on within the company and to share their perspectives. “I believe that’s what’s going to build our culture.”
Teaming will become more prevalent as real estate professionals get together and specialize, he predicts. “Within a team you’ll have speciality tasks for people – you’ll have a marketing specialist, listing specialist, administrative specialist. People are going to have to become more efficient at what they do.”
In addition, Sutton is putting a greater focus on technology to help eliminate the amount of time salespeople and brokers waste on what he calls non-value adding tasks.
Keddy also wants to create a mentorship program that will allow for a transfer of knowledge from baby boomers to millennials. “Our demographics are aging quite dramatically. A lot of these people, when they end up leaving the industry, are going to take all their knowledge with them.”
The program, which Keddy would like to implement in the next two quarters, would take brokers with huge client databases who are close to retirement and put young people who are new to the business under their wings.
The newbies would “do all the grunt work” and learn firsthand what’s taking place in the industry rather than learning from a seminar. “That is the fastest way you’ll learn – by being thrown right into the fire.”