The organic man

Nathan North, 'Eurobuild CEE': There have been many recent changes at the management level at JLL...
Tomasz Trzósło, Jones Lang LaSalle: There has been John Duckworth's departure as Poland and CEE managing director to join the UK board; my appointment as Poland managing director and head of capital markets here, while Troy Javaher takes over for CEE capital markets, with a focus more on the CEE/SEE regions and less on Poland. Simultaneously, Gijs Klomp, formerly the head of ING REIM, which was bought by CBRE Investors, has become managing director for the JLL office in Romania. Importantly, John Duckworth was the MD for the whole of CEE business, and we are not replacing his role. As part of the changes for the region, we have now created a new CEE management board comprised of country MDs and chaired by Richard Batten from the EMEA management board of JLL.

Are these changes part of some change of strategy or the company structure?
These might seem like a lot of changes, but in fact there are only few of them, and they don't change the structure of the company very much. The few changes do reflect the strategy of the company, which is about being the best and about being the first, so the first choice for clients and for employees. This is a growth-orientated strategy and what we have done recently is designed to increase JLL's strength in the CEE region. With the new CEE board, and with our pan-CEE business line heads, we will be able to ensure coordination of business flow and client work between the CEE and SEE countries, which we believe to be very important; but also importantly, with Richard Batten chairing the CEE management board, the CEE MDs and the CEE country offices will now have direct access to the EMEA management board. This just proves that the CEE/SEE region has been elevated to a higher level at the EMEA management board of JLL, and this is excellent news for us here on the ground. There are no further changes planned. We are looking at growth for selected business lines in the CEE region, but there is unlikely to be a major recruitment drive. The organic and hard-work based growth should continue, so it should be usiness as usual. Now the merger has been fully completed and the teams integrated and stabilised, we are focusing on organic growth, the quality of service and client relationships, and not on any post-merger activity.

How successful has the JLL-KS merger been? Have there been any problems?
King Sturge was identified as a best fit. The main business of King Sturge was in the UK, so it made most sense from that point of view. From the CEE perspective we enlarged our presence to new markets as King Sturge had offices in Croatia, Serbia and Slovakia, and across the entire CEE region we gained a number of valuable people. A couple of team leaders decided to leave in Poland, but we have kept a high number of quality people across the entire region who have integrated into JLL well. We have also benefited from senior King Sturge top level management experience. Richard Batten, who now heads the CEE/SEE management board, for instance, came from King Sturge. King Sturge's clients were also an equally important positive. There was a risk of conflicts - two neighbouring properties could have leasing mandates exclusive to Jones Lang LaSalle and King Sturge, for example. In such a case there is a risk that you can't hold on to both mandates, but our goal was to ensure a high level of transparency around such potential conflicts, protect the interests of all clients and continue to act on all existing instructions. And fortunately there turned out to be very few of such cases that would involve terminating our mandates.

Was the investment and effort worth it?
From a single country perspective, the main effort lies in the management time that needs to be devoted to the merger and integration of the people. At the same time you have to maintain the same focus on the ongoing business, as it's critical that there is no impact on clients and existing mandates. In our case this has happened relatively smoothly. Revenue has undoubtedly significantly increased and we managed to integrate the two businesses well, and in a short time. This was clearly a successful process for us in this region.

Is the period of mergers and acquisitions of real estate agencies now over?
The consolidation of the market is still an ongoing process. Some smaller companies are finding it difficult to compete on a wider scale. King Sturge's people told us at the time of the merger that without a global reach it would be difficult to develop their business forward. Global corporates tend to sign global mandates rather than operating on a country-by-country basis, and so global reach does significantly help in new business generation. Smaller consultancies do not have such an advantage and so they have to look at mergers or alliances to be able to develop. This trend is only likely to intensify, and so there might be another major takeover or merger on the cards with other agencies. However, it won't be driven by the Polish market as the reasons for such consolidation are global.

Have players like yourself become more dominant since this consolidation began?
I don't think the competition is going to diminish. We will still have seven or eight main competitors and I have no doubt that the competiveness on the market will continue. This might be something of a sci-fi scenario, but if we ever get down to just three big players that would still mean a competition between three such companies; but I am sure that in such a case it would give room for smaller companies to come in and take a bite out of the market. The competition is also now not only between agencies in certain business lines. There are a good number of developers offering PM services to third party clients, in the same way as agencies do. Accounting firms are offering consultancy and valuation services, as well as capital markets advice in some cases. We can also see investment banks trying to get into the investment advisory market, so there are a number of companies that are extending the range of their services into traditional real estate territory. Please also note that global mandates are typically based on fees being pushed down by discounts, so local deals will continue to be important and global companies will have to compete with good small local firms.

When it comes to PM services, isn't this one area that you are focusing on more?
PM is important to us - it gives you a stable cash flow that doesn't follow the typical market cycle. It also increases the market coverage, strengthens client relations and provides the potential for the cross-selling of other services. So we plan to grow this business line, but rationally. Our top priority in Poland is the highest quality client service, and not the speed of growth. We are therefore taking a lot of small steps rather than making one big jump into something. The main thing is that we now have the right people and business in place, so it would be insane to make big changes. The growth in our PM service line will be a case of evolution not revolution.

Tomasz Trzósło
is responsible for the strategic management of the Polish division of Jones Lang LaSalle. Prior to becoming managing director, he was head of the CEE capital markets team. He has completed a number of high profile investment transactions in Poland and the region, as well as a number of debt financing and structured equity financing mandates. He has 16 years of experience in CEE capital markets.