Colliers stays upbeat at 20 years old

Mark Synnott, managing director of Colliers International in New Zealand, says he has 'seen this sort of blood and guts before'. Photo / Richard Edghill

Colliers International is celebrating 20 years in New Zealand amid similar conditions to its launch in Auckland in 1989 when the Australian-founded brand was barely a decade old.

To others in the commercial property industry in the late 1980s, it probably seemed the timing for a new player to appear on the market was completely wrong.

The property market was at an all-time low following the 1987 sharemarket crash, with New Zealand in worse shape than most Western economies. Many companies had disposed of their property assets or had left the market.

Despite the conditions, Colliers arrived and set up as a property services company adopting the same culture that led to the formation of the group in Australia where the company was noted for employing the latest technologies and work practices.

This later included moving away from traditional office layout of compartmentalised workspaces and offices to a modern, open-plan structure that is still a hallmark of the business today - featuring a wireless office combining BlackBerry mobile phones and computers that enable staff to work seamlessly at their desks, in meeting rooms, in client premises and away from the office.

"When I took on the role, senior managers were all hidden away in their offices, so one of the first things I did was take out the offices," says Mark Synnott, who has been with Colliers for 20 years including 15 years as managing director. "I felt there was not enough collegiality and the move helped immediately to create a team atmosphere and promote cross-team interaction."

When Synnott began running the company in 1994, Colliers had 140 people working for it and the workforce was reduced to 100 within 18 months.

"Auckland and Wellington were seeing CBD vacancy rates of 30-35 per cent, so we spent the first two to three years driving the profit line," Synnott says. "We cut ourselves back to basics with less people doing more business."

Synnott believes that having weathered previous economic recessionary periods has stood Colliers in good stead in the latest downturn.

"I have seen this sort of blood and guts market before so Colliers hasn't panicked. We have a good balance of brokerage and professional services revenue. We're in good shape and we're still growing, adding quality people and offices to the team."

John Goddard, Colliers International sales director, and one of the company's long-term and most senior team members, says three fundamental drivers mark the differences between today's market and the period between 1991 and 1995.

"Firstly, interest rates in 1991 were 300/400 basis points higher than property yields and as the market moved into forced sales in 1993-95, interest rates remained double digit at around 11 to 12 per cent. However, at the moment yields are higher than the cost of funding," Goddard says.

"Secondly, in the 1990s high net worth Asian investors chased our yields in a localised distressed market due to the weak New Zealand dollar, low yields in their own country and spare cash generated from the US tech boom ... Therefore, New Zealand and Australia ran counter-cyclically to the rest of the world and we were comparatively the only 'cheap market' for them. But today, financially speaking, investors live in a 'global candy shop' where choice abounds, so we have to work harder to attract the cash that is around."

"Thirdly, in the 1990s, deposit rates were double digit. Therefore the cost of equity raising was prohibitive. By contrast, current deposit rates are at an all-time low, so depositors are seeking higher returns from corporate bonds and property. It is worth noting that $1.4 billion of corporate bonds have been raised since January this year."

Peter Herdson, Colliers International sales director, also notes that although the market is still volatile, interest rates are low.

"We're seeing a cleanout of over-leveraged developers, which creates opportunities. While there's no doubt that the market will be more conservative, looking to the fundamentals, opportunities are still presenting themselves," Herdson says.

"We have just completed New Zealand's largest commercial portfolio deal of the year so far, with the unconditional sale of a portfolio of seven prime freehold retail properties in the North Island owned by New Zealand Post. These properties sold for nearly $45.5 million, representing a yield range of 5.38 per cent to 7.6 per cent and averaging 6.5 per cent."

Other signs of Colliers' success in difficult times is the company's involvement in leasing 80 Queen St to Deloitte and BNZ, and the redevelopment of Auckland's Britomart precinct, in which Colliers has leased much of the space to date including a major new building to Ernst & Young and the CPO building to Maersk Line.

Synnott says the doubling of the company's Wellington office size through a merger with Harcourts in 1999 was a defining point in the development of the company's franchise model, which became the catalyst for subsequent growth.

"We decided to grow the company aggressively at the beginning of 2000," says Synnott. "As a result revenue jumped up by about 30 per cent over the first year and, despite dips in 2001 and 2008, it has grown at a compound rate of 18 per cent per annum."

Synnott says that after the decision was taken to drive Colliers' growth through franchising its property services, the senior leadership team aimed for the company to be in all major centres of population of over 100,000 and partnered with the right people.

"The only exception we made was Queenstown, which is smaller," says Synnott, "But it is a place with a core of high net worth individuals."

Colliers' first franchise was founded in Christchurch as a joint venture in 1992 and the company now has 13 offices throughout New Zealand.

Synnott says expansion has driven the firm's continued revenue growth, even in more difficult market conditions recently.

"Although 2008 was a bit of a dip, we grew our South Island presence by opening new Nelson and Queenstown offices, taking a majority stake in Livingstones Property Management and, through them, the Fright Aubrey valuation business. In doing so, we have grown our South Island business by three times in the last 24 months and built strong foundations for future growth. The Dunedin office we opened this year is in the last major market we need to be in so we now have a network that covers the entire country."

Synnott believes a key to Colliers' success is attracting and keeping experienced professionals to engender a strong team spirit and "extended family" feeling within the company.

"Our leading people have grown up in this team culture and the majority of our product line directors have been with us for over 15 years."

Andrew Stringer, the newest member of the senior leadership team who joined in late 2008 to head up the national valuation business, says Colliers' philosophy is that "two or three minds are better than one - and that way clients get better value".

Flexibility is also an ingredient to success in difficult markets. For example, when the property market weakened in 2007-08, Colliers expanded its corporate recovery work into a significant revenue source.

Maintaining a positive viewpoint during recessionary times is another factor built into Colliers' strategy.

"We are growing our market share at a time when others are pulling back," Synnott says. "We're expanding into new markets such as residential project marketing, in which we are experiencing some good success with our Stamford Plaza project. In addition, our professional services business has doubled in size over the past two years.

"Mark Parlane and Russell Clark have recently joined Colliers' Valuation and Consultancy team in Auckland and this will allow us to take a further step in our ambition to be New Zealand's leading valuation business."

Synnott says the firm's generally gung-ho view about the New Zealand market is not based on irrational emotion but on experience and extensive research.

"A wealth of local knowledge underpins much of our strategic direction and is the basis for the company's 'Our knowledge is your property' slogan. As part of our 'knowledge gathering' we also listen to our clients and study reports about trends and developments in the marketplace.

"For instance, there is a flight to quality with our clients demanding better-quality premises than they did 20 years ago.

"They want buildings to be 'greener' and more efficient."

Synnott says having a "knowledge-based strategy" gives Colliers' managers the confidence to weather storms like a global credit crunch. "In turn, this provides prospective investors with the confidence to buy, lease or raise capital."

No big 20th birthday bash is planned for the 400 people who work for Colliers and its affiliates this year.

"We're saving that for our 21st year when we will really come of age."