Mid-Size Realty Firms Being Squeezed Out by Big Offices

The big are getting bigger, the small are surviving and those in the middle are getting squeezed out of business.

This seems to summarize the situation for many real estate brokerage firms in the San Fernando Valley and Ventura County today.

The San Fernando Valley Assn. of Realtors reports that it currently has about 6,800 members, down 500 from last year and down from 10,500 in 1990 and 12,000 in 1981. While membership has declined, the number of realtor offices has increased from 1,586 in July, 1990, to 1,773 in 1994, and to 1,849 today.

Fewer members and more offices means that more people are working independently, observed James A. Link, executive director of the San Fernando Valley Assn. of Realtors in Van Nuys.

The biggest share of the business, though is going to the big players. “The big ones are getting bigger, suggesting that the middle is getting squeezed out and many agents are just working independently or not at all,” Link said.

“The market is being usurped by big and small offices,” said Mike Monteleone, a broker at Remax on the Boulevard in Sherman Oaks. “The mid-range company is always trying to catch up with the leaders.”

For 20 years, Monteleone had his own real estate brokerage firm in Sherman Oaks. Tough times forced him to merge into Remax, however. Monteleone & Associates at one time had about 80 agents. Before the Northridge earthquake, the company had 45 agents; after the quake, his business really took a hit.

About half of the properties being sold by Monteleone fell out of escrow and he lost a sizable chunk of his personal real estate holdings.

Even if the quake hadn’t happened, though, “I would still have been struggling because of the market,” Monteleone said. “I was forced into a quick move, but it ended up being the best move for me.”

As a mid-size company, Monteleone said, he had a great deal of overhead but still couldn’t keep up with the major real estate firms. Now, Monteleone said, he is free from having to spend his days as a manager. Instead, he has gone back to selling and his income has increased.

“Mid-range companies like mine suffered the most during the last few years,” Monteleone said. “My merger with Remax was a blessing.”

“We’ve seen a tremendous amount of fallout among mid-size companies,” said John Maquar, president of Prudential California Realty in Northridge. Maquar’s company was formerly S.J. Heritage, but that name is no longer in use and Maquar turned his Northridge firm into an office of Prudential California Realty.

“Many brokers have moved their offices into their homes or just disappeared,” Maquar said. Instead of suffering the same fate, Maquar decided to affiliate with a giant in the business and get bigger name recognition. In the process, Maquar reported, his office has grown within the last year from 85 agents to 105.

“The large independents and the national franchises are getting larger and a lot of the smaller- and medium-size companies are merging with the bigger ones,” observed Bob Popp, regional director of Century 21 of the Pacific in Woodland Hills. Business has been down about 12% from last year for all of Century 21’s franchisees in the Valley, Popp reported.

The largest of the franchisees, however, have actually increased their business during the last 12 months, Popp said. “It’s the big getting bigger,” Popp said.

In 1990, Century 21 of the Pacific had 27 affiliates in the Valley area; now that number is down to 21. That isn’t bad news for Century 21, though, Popp said. “We’ve always supported mergers as a good way for a brokerage company to grow.”

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While many medium-size brokerage firms are getting squeezed, there is still opportunity for brokers who work independently or with a handful of other brokers or agents, said Kay Runnion, executive officer of the Conejo Valley Assn. of Realtors in Thousand Oaks.

“Small or individual brokerages are able to do OK if they take advantage of advances in technology,” Runnion said. “Because of computers, many brokers are able to do very well working at home.”

Commercial real estate brokerage firms have also been cutting back, but most of the medium-size companies continue to survive, said Mike Zugsmith, chairman of Capital Commercial Real Estate Services, which has area offices in Encino, Westlake, the city of Ventura and West L.A.

“I am constantly hearing rumors about people closing,” said veteran broker Zugsmith. “But they seem to keep on chugging.”