A partnership between commercial property services company Broll and global real estate services firm Cushman & Wakefield will support the expansion of Broll's footprint into North Africa and the Middle East, providing real estate services to tenants and helping them to optimise their spend. Ray Mahlaka spoke to Malcolm Horne, Group CEO of Broll Property Group, and Ken Gerber, the MD of Cushman & Wakefield | Broll, about the intricacies of this deal and what it will mean for tenants on the African continent.
Broll Property Group recently concluded an exclusive affiliate agreement with US-headquartered Cushman & Wakefield, aimed at covering the sub-Saharan Africa region. The agreement, which has been six months in the making, has all the markings of a successful business partnership – certainly, the due diligence process has been given the attention it deserves.
“We have been on the lookout for a new international partner since January 2019. And after we participated in several roadshows, we found a lot of synergies between ourselves and the Cushman & Wakefield team,” said Malcolm Horne, Group CEO of Broll.
Although formal talks began six months ago, the relationship and business dealings between the companies go back 14 years.
The exclusive affiliate arrangement is a coup for Broll. Over the past 44 years, the firm has offered a suite of real estate-focused services including auctioneering, property management, research, valuation and advisory services, retail leasing, broking and occupier services, across 16 sub-Saharan Africa countries (including its South African home market).
And collaborating with Cushman & Wakefield, which is the world’s third largest real estate services firm, easily propels Broll beyond the African continent as it will gain access to the former’s international and high-profile clients in over 70 countries. Some of Cushman & Wakefield’s real estate clients have a burning desire to expand their operations into sub-Saharan Africa and Broll will be their link to the region.
“It’s a match made in heaven. We will be getting access to international markets and international clients. And we are opening up the African market to Cushman & Wakefield as well,” said Malcolm.
The partnership with Cushman & Wakefield only involves Broll’s sub-Saharan Africa-based occupier services business unit. In other words, Broll’s other services such as auctioneering, property management, research, valuation, and advisory services, and retail leasing are excluded from the partnership.
Ken Gerber, the MD of Cushman & Wakefield | Broll, supported Malcolm’s views saying there are synergies between Broll and Cushman & Wakefield regarding their operations and real estate strategies.
“What really impressed us about Cushman & Wakefield, besides their status as one of the leading real estate companies in the world, was how similar our businesses already are,” said Ken. “From the very first meeting we had, it was obvious that we shared similar views around professionalism, integrity, client-centrism and there is an overall alignment on the direction that the market is moving in. Above all, we could see how our people gelled with each other. I think it’s going to be a very powerful fit.”
About occupier services
Occupier services is an important business unit. Broll decided to launch the unit in 2005, realising that there was an opportunity to offer tenants at shopping malls, office buildings and industrial/warehouse properties support services. In the occupier services unit, Broll works directly with tenants and not landlords – advising them on various real estate services such as introducing technological and financial data solutions to better manage their use of space, utilities use (electricity and water), collecting and paying the rental of the occupier to the landlord.
As Malcolm puts it: “the differentiator with occupier services is that you are appointed by the user of space for their real estate needs. It’s about anything within the tenant space, providing service to a tenant and optimising their real estate spend.”
Broll’s occupier services business unit has built a track record of working with many multinational companies that occupy real estate space. It is this track record that has impressed Cushman & Wakefield, prompting it to cement an exclusive affiliate arrangement with Broll.
Cushman & Wakefield didn’t have a desire to build an occupier services business, which focuses on sub-Saharan Africa, from scratch. It wanted to partner with a firm like Broll, which already has exposure to sub-Saharan Africa and local knowledge about real estate fundamentals in the region. Underscoring Broll’s reach in the region is the fact that the group has offices in Angola, Ghana, Ivory Coast, Kenya, Madagascar, Mauritius, Mozambique, Namibia, Nigeria, South Africa, Swaziland, Uganda, Zambia, and others.
“We have built the largest services business on the continent and we are proud of that. It was easier for us to pitch in and show Cushman & Wakefield what we have and are capable of because we already have the track record in region. That’s why I think there was a synergy between both of us. They also understood that we have a good understanding of the occupier services industry,” said Malcolm.
It’s well known by now that international firms need a local partner if they have ambitions of taking advantage of sub-Saharan Africa’s forecasted three percent economic growth for 2019 (according to the World Bank), rising consumerism, a relatively young population, and industrialising economies. These market dynamics are largely known as the “Africa rising” story.
Malcolm said there is still an appetite by multinational occupiers of space to make a foray into sub-Saharan Africa.
“What is important is for us to be the first point of contact for multinational occupiers. We are encouraging multinational occupiers to come into the region. If you have the wrong interface from the beginning with them, you can make their journey into the region more difficult.”
The year 2015 was a turning point for many sub-Saharan Africa economies that relied heavily on the production and export of commodities for their fortunes.
Africa’s largest commodity producers and exporters such as Nigeria, Angola, Equatorial Guinea and Algeria, whose oil proceeds account for more than 70 percent of exports, were hit the hardest and faced serious economic headwinds due to low commodity prices. However, most of these countries are on a path towards economic recovery as commodity prices have rebounded.
Although the broader sub-Saharan Africa economy is not as strong as developed economies, Malcolm said there are still opportunities to be realised not only in the real estate services industry.
“We are finding that there is a space for us to promote the international entry of multinationals that are either looking for oil or gas opportunities in Mozambique or Ghana. In Nigeria, we are finding interests from retailers in Turkey. And in South Africa, we have international retailers that are still looking to come into the country.
“As a business, we need to have our key skills ready to be able to deal with inquiries from multinationals and local big users of space that want to jump into other geographies. They might want to move from Nigeria into the Ivory Coast.”
The entry of international multinationals into sub-Saharan Africa or the expansion of domestic players further into the region is a good thing. It means that they will demand real estate for their operations, and ultimately real estate services – like those offered by Broll.
Occupier services opportunities, Africa expansion
The occupier services business unit under the exclusive affiliate arrangement will be branded as Cushman & Wakefield | Broll. At the heart of the agreement is people and their real estate skills.
The exclusive affiliate arrangement will see the collaboration of Broll and Cushman & Wakefield employees, working on occupier services-related and other real estate opportunities across different jurisdictions and workstreams that reach across the US, Middle East, Europe, and sub-Saharan Africa. After all, Cushman & Wakefield has real estate professionals stationed at its offices in the US, broader Europe, Middle East, Asia and sub-Saharan Africa (mainly South Africa).
Malcolm said the partnership is important for skills development in the real estate industry because Broll employees can benefit from Cushman & Wakefield’s larger scale. Through Cushman & Wakefield, Broll employees can be exposed to international best practices regarding the execution of occupier services.
“Often, we say that we are great at what we do as Broll. But the question is; can we stand on the international stage and be counted among the best of the best?”
He acknowledged that the broader goal of the partnership is to professionalise the entire property industry. “If the real estate sector formalises and professionalises, it can only be good for countries we operate in and the growth story of the continent.”
The partnership is also expected to be a boon for Broll because it has ambitions to establish offices in North Africa and the Middle East. On its radar in the next few months are Egypt, Morocco, and Dubai. It will rely on the expertise of Cushman & Wakefield for its expansion plans.
Depending on market dynamics and where opportunities lie, Broll might offer a full suite of property services and not only occupier services in North Africa and the Middle East.
“It’s a logical move,” Malcolm said about expanding Broll’s footprint.
“There are close ties between London and the continent, Dubai and the continent. A lot of people around the world are coming into various access points. Those are the two logical access point we think we can be involved in. We hope we can tell the Africa growth story. At all times, we want to remain an Africa-focused business.”
Arguably, it’s not hard to see why Broll’s interest has been piqued by North Africa and the Middle East. The World Bank expects the region as a whole to pencil in an economic growth rate of 1.9 percent in 2019 compared with 2018’s 1.7 percent.
Despite slower global trade growth and tighter external financing conditions, domestic factors, particularly policy reforms, are anticipated to bolster growth in the region. Egypt alone, which Broll is targeting, is expected to grow its economy by 5.6 percent in 2019, as the country’s investment is supported by reforms that strengthen the business climate. Its growth is also expected to be driven by a rise in consumer consumption. The country, which is an oil importer, has been in reform and rebuilding its economy since the political uprising in 2011, which ended the three-decade-long presidency of Hosni Mubarak.
The South African situation
Meanwhile, Broll’s South African home market is expected to record economic growth of less than 1 percent in 2019.
Economic growth in South Africa, which is Africa’s most industrialised economy, is undermined by heightened political uncertainty, low levels of domestic and foreign investment, deteriorating business confidence, and power cuts that have intensified in recent months. The country is on the brink of losing its remaining investment grade credit rating from Moody's Investors Service.
Market watchers expect political stability to return in South Africa considering that the country’s general elections, which gave President Cyril Ramaphosa a definitive mandate in May 2019, are over. But there is still a lot of work to do to stabilise South Africa’s economy and for capital markets in the country to recover.
Malcolm stressed that Broll’s expansion into North Africa and the Middle East does not necessarily mean that the real estate services firm is not bullish about South Africa or that it’s turning its back on the country. He said any company that wants to grow in a sustainable manner must, at one point, explore diversifying into new markets.
Broll’s diversification efforts will not reach Europe.
“For us, it is about aligning ourselves with an international firm that has got reach across several continents. We can help our clients get good advice in several jurisdictions. We wouldn’t go to Europe. If we come across any Europe-based opportunity, we’d rather refer it to the Cushman & Wakefield business. We don’t have the desire to conquer the world.”
While world-domination can wait, it certainly seems that Cushman & Wakefield | Broll has set the stage for conquering Africa. The synergies inherent in the partnership will doubtless yield successes on the continent as many companies expand into the region with occupier services support from this new entity.