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CB Richard Ellis (CBRE) CB Richard Ellis Jones Lang LaSalle(JLL) Cushman & Wakefield Colliers International Colliers International Trammell Crow Co.(TCC) NAI Cushman & Wakefield(C&W) Grubb & Ellis NAI The CORE Network ProLogis Jones Lang LaSalle Simon Property Group The Staubach Lincoln Property GVA Worldwide RREEF TCN Worldwide General Growth Properties Trammell Crow Grubb & Ellis (GBE) Marcus & Millichap PM Realty Group Newmark & Co. Brookfield Properties Burnham Real Estate Equity Office Properties Transwestern Commercial Duke Realty Lee & Associates GVA Worldwide Sperry Van Ness Hines CORFAC International Developers Diversified Realty HFF Holliday Fenoglio TCN Worldwide CRESA Partners Archstone-Smith Trust Century 21 First Industrial Realty Trust Richards Barry Joyce & P The Inland Real Estate Group Duke Realty Transwestern Commercial Molinaro Koger Sentinel Real Estate Mid-America Real Estate
CBRE 5.9% C&W 2.7% TCC 1.8% GBE 1.3% 25% JLL 1.2% 62%
Building Owners and Managers Associations International RPA (Real Property Administrator) SMA (Systems Maintenance Administrators) FMA (Facilities Management Administrators) Institute of Real Estate Management CPM (Certified Property Manager) AMO (Accredited Management Organization) ARM (Accredited Residential Manager) International Council of Shopping Centers CSM (Certified Shopping Center Manager) CAM (Certified Apartment Managers) National Apartment Association CAMT (Certified Apartment Maintenance Technicians) CAPS (Certified Apartment Property Supervisors National Multi Housing Council CLP (Certified Leasing Professional) ARAM (Advanced Registered Apartment Manager PPM (Professional Property Manager) National Association of Residential Property MPM (Master Property Manager) Manager CRMC (Certified Residential Management Co.) International Facility Management CFM (Certified Facility Manager) Association Certified Commercial Investment Membe CCIM (Certified Commercial Investment Member)
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< ABSTRACT > A Study on the Growth Strategies of Domestic Property Management Companies In the Era of Indirect Real Estate Investment - Focused on the Analysis of the U.S. Property Management Market - Yong-Nam Kim Department of Real Estate Management Graduate School of Real Estate Studies Konkuk University Advisor : Joo-Hyun Cho Since the foreign exchange crisis in 1997, the real estate market in Korea has experienced rapid changes in relation to the real estate investment and management system. As part of efforts to cope with the economic difficulties, the Korean government has opened real estate market to attract foreign investors and introduced indirect real estate investment system such as ABS and CR-REITs. In 2003, the Asset Management Act was established and has been in force since 2004. A variety of real estate funds have been launched through the indirect investment
vehicles under the Act. The REIT ACT was also revised to allow self-managed REITs in 2004 and being in operation since April 2005. The both Acts opened a new era for indirect real estate investment in Korea. The amount of investment through the indirect investment vehicles has been on the rise. As indirect real estate investments grow in size and number, owners of real properties will be changed from individual or corporate owners to institutional investors such as pension funds, REITs, and financial institutions. Through the analysis of U.S. property management market, some trends were observed. The first trend is institutionalization of property owners. Since 1960 when REITs were established, the rate of property ownership by institutions has been increased and in 2003 institutional investors owned more than half of all U.S. real estate. The second trend is consolidation among real estate management companies to gain economy of scale. A wave of mergers and acquisitions occurred among commercial real estate management firms during the 1990s and into the twenty-first century. The third trend is service expansion toward a full-service firm. Institutional investors prefer to work with a full-service company to secure competitive edges and consistent services. Considering that current real estate investment market is dominated by both foreign investors, REITs and real estate funds as in the U.S., the trends mentioned above are expected soon to be formed in Korea. Compared with the U.S. counterparts, domestic property management companies are very weak, especially in terms of company size and range of service offerings. For domestic third-party property management companies to survive and grow in an indirect real estate investment era, they are strongly required to devise effective growth
strategies. As in the U.S., domestic institutional investors will be likely to first work with full-service management companies to reduce any possible risk related to firm size. Accordingly, domestic third-party property management companies are needed to design and execute new growth strategies in line with indirect real estate investment era, as follows: The first strategy is to recruit talent to better serve institutional clients since they will request more roles from property management companies. The second one is expand range of service offerings. The third one is to manage a variety of properties including residential, industrial and retail properties. The fourth one is to strengthen strategic alliance with partners. The fifth one is to establish subsidiary companies as part of vertical integration. The sixth one is to execute M&As to gain economy of scale and expand service offerings. The last one is to develop property management software to effectively manage and communicate with property owners. In addition to the above growth strategies on the part of each property management company, the government should play its role to develop an effective real estate management system in Korea by enacting a law to allow for professional management organizations to issue professional property management designations such as CPM and CCIM to those who are eligible for the licenses, thereby enhancing domestic property management industry level.