Industry veteran argues independent brokers are being sidelined at public companies in favor of predictable revenue streams
The commercial real estate industry is witnessing a fundamental shift in brokerage models, with major firms increasingly prioritizing corporate services over traditional broker-led business, according to Eric Paulsen, Chief Operating Officer of Kidder Mathews.
“Our competitors have actually changed their business model, and they’ve gone more to a corporate services real estate provider,” Paulsen explains. “The brokers are not the primary anymore. It really comes down to being the outsourced real estate department.”
Paulsen argues this shift at publicly-traded firms stems from pressure to deliver predictable revenue streams. “These majors, CB, Cushman and Wakefield, JLL, all really are focusing their attentions on static, predictable income because they’re public,” he notes. “They’re all trying to get something where they can say, ‘Look, here’s our big, solid volume of consistent revenue.'”
In contrast, Kidder Mathews has doubled down on what Paulsen calls a “broker-centric model.” The firm operates on a unique compensation structure where brokers receive up to 90% of commissions after desk costs.
“For us, it’s really the true entrepreneurial shop where the broker can be a broker and do his business plan on a platform that provides him what he wants,” Paulsen says. This approach appears to be resonating – the firm has grown to over 500 brokers across 21 offices in six states.
Governance reflects this broker-first philosophy as well. “We have an 11-person board, and nine of those 11 are brokers,” Paulsen notes. “When you say growth, and when you say things of that nature about where we’re headed, it really comes down to new markets and/or filling in what we do have.”
While maintaining its entrepreneurial culture, Kidder Matthews has invested in comprehensive broker support services. “If you’re a ‘traditional broker,’ I’ve got everything you need to run your business,” Paulsen says.
However, he acknowledges this can be a tough message to convey. “When you turn around and say, ‘Hey, it’s 50-50 to 140, and then 90-10,’ they view you as a chop shop, they probably don’t provide this, this and this. So getting the message out is crucial.”
As the industry continues to evolve, Paulsen sees opportunity in the contrast between Kidder Matthews’ model and that of publicly-traded firms. “Our competitors continue to cut resources to their brokers and make it more about the company than it is about the individual broker, which is pretty much the inverse of what we do.”
The firm is now eyeing expansion into new markets like Dallas and Colorado while ‘backfilling’ existing territories. With what Paulsen calls ‘a full-bodied roster of managers’, the company appears positioned to continue growing its broker-centric approach even as larger competitors move in different directions.
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