Harry Blum still remembers the day they said his business was a goner.
It was 1986, and Mr. Blum was attending a Maryland Association of Realtors convention. During a panel discussion about the future of real estate in Maryland, several heads of major local brokerages declared that small companies would soon become extinct.
"They were basically saying that the only companies that would survive would be the large ones," recalls Mr. Blum, president of Fiola Blum Inc., a 49-agent Pikesville real estate company mainly active in Northwest Baltimore.
Like other small- to medium-sized brokers, Mr. Blum, whose mother founded Fiola Blum Inc. in her breakfast room in 1949, ignored those ominous predictions. He believed that a well-run small company could hold its own. Time has proven him correct.
True, the trend of consolidation still rumbles along. Giants such as O'Conor, Piper & Flynn, Grempler Realty Inc. and Long & Foster Real Estate Inc. have snapped up smaller companies. RE/MAX International Inc. and Century 21 Real Estate Corp. have opened franchises across the state. And such companies, which boast hundreds of agents and hundreds of millions of dollars in sales every year, still dominate the local market.
But many independent "boutique" real estate companies have survived, even in these recessionary times. Some are even thriving.
A few examples:
* Hill & Co. Realtors, a 25-agent brokerage known for dealing in upscale properties from the Inner Harbor to the Maryland/Pennsylvania line, is having a record year, with sales expected to top $75 million. That's an improvement of about $17 million over last year, according to Timothy Rodgers, the owner.
* After suffering setbacks last year, a bad period for most brokerages, Fiola Blum Inc. expects to post sales of about $40 million -- close to 1989 figures of $42 million, according to Mr. Blum.
* Sales at W.H.C. Wilson & Co., a 32-agent company based in Roland Park, have increased 22 percent over 1990, according to Adam Cockey, the managing partner. The 41-year-old firm expanded recently by merging with the Hubble Co., a 35-year-old firm located in Guilford.
Moreover, the recession hasn't discouraged new small brokerages from opening, according to Fletcher Hall, executive vice president of the Greater Baltimore Board of Realtors.
As in previous years, between 10 and 30 new firms have applied for GBBR membership this year, said Mr. Hall. He noted that of the approximately 400 real estate firms that make up the board's membership, most are small or medium-sized.
National trends follow a similar pattern, according to John Tuccillo, chief economist at the National Association of Realtors.
"There's always a fear when there's increased activity from larger firms that this will drive the smaller ones out of business," he said. "But that doesn't necessarily happen. It's clear to us that there are a number of small firms throughout the country which are more than holding their own . . . ."
Rise of the giants
Fifteen years ago, no doubts would have been raised about the viability of the small firm. In those days, the Baltimore-area market was dominated by small- to medium-sized real estate firms, the largest of which probably had no more than 100 agents.
But in the late 1970s and early 1980s, as large, multi-office real estate companies came into vogue, the face of local real estate ** began to change.
Between 1979 and 1983, national companies such as Merrill Lynch Realty and Coldwell Banker Residential Real Estate entered the market by purchasing multi-office firms. In 1982, Long & Foster Real Estate Inc., a company founded in Fairfax, Va., opened its first office in Baltimore and set its sights on more. (It now has 27 offices here.) Two years later, five small- to medium-sized firms merged to become O'Conor, Piper & Flynn.
At the same time, Grempler Realty Inc., a local brokerage founded in 1960, was expanding steadily, buying up small companies and opening numerous offices around the city.
Most of these companies aimed for fast growth and a multitude of offices. Since its formation, for example, O'Conor, Piper & Flynn has purchased 21 other companies; it now has a total of 37 offices and 1,322 agents.
Such giant companies typically offer elaborate training and marketing programs, as well as in-house mortgage, title and insurance companies. That's tough for small firms to match.
To stay afloat, many small firms emphasize professionalism, and personal service enables them to stay afloat.
Take Herbert Davis Associates. The 14-agent company, which handles properties all over central Maryland, employs solely full-time agents.
"In a seller's market, where all you have to do is throw a listing onto the computer and somebody will sell it, a part-time agent who doesn't know very much and doesn't work very hard can probably succeed," said Lois Schenck, a partner in the 12-year-old firm, which specializes in unique or "problem" properties. "But in this market, you have to know how to put the right price on it, and that takes a lot of skill, a lot of time and a lot of up-to-date, in-depth knowledge of the market. A part-time agent can't compete."
Hill & Co., the Cross Keys firm, stresses personal service, too. "I think more and more, service and personalized attention are pTC what people want," said Mr. Rodgers. "People don't like to be a number, lost in the shuffle. We really know our clients and our properties."
Other companies are finding success by imitating some aspects of the larger companies. Within the past year, Roland Park-based Wilson, added a mortgage company, an appraisal division and a title company in an effort to create the kind of "one-stop shopping" convenience offered by the larger companies.
Mr. Cockey, the managing partner, does not, however, intend to follow in the large companies' footsteps by opening numerous offices. The firm finds that it can operate well with just two offices.
Disappearing firms
Not every small company has kept its doors open. Hubble, an eight-agent firm that was active in Guilford, Homeland and Charles Village, merged with Wilson earlier this month after one of its principals, Nancy Hubble, decided that she no longer wanted the burden of managing an office.
"Trying to be a selling broker and manage the company at the same time is very difficult," said Ms. Hubble, whose daughter, Karen Hubble Bisbee, also joined Wilson & Co. on Nov. 1. Both now are partners with the firm. "I decided that I only wanted to sell."
Ms. Hubble admitted that her company earned less this year and last year than in previous years. But, noting that she and her daughter each sell a minimum of $4 million per year, she denied that financial reasons prompted the merger, or that the company was being squeezed out by the larger firms.
"We always had our own little niche in the city, so we didn't really feel pressure from our big neighbors," said Ms. Hubble.
And the recession has taken its toll on some small companies. For example, Best Realty Group of Columbia, a 24-agent company founded in 1987, merged with Long & Foster this past June.
High overhead costs, combined with a halt on new home sales and land development forced Jim Bodine, the owner, to throw in the towel. "The most important thing is that I could not really achieve any substantial market share," said Mr. Bodine, who noted that a steady flow of agents had defected to larger companies.
Indeed, companies such as Long & Foster and O'Conor, Piper & Flynn are still buying up smaller companies at a healthy pace. So far this year, O'Conor Piper & Flynn, which is the largest in Baltimore, has acquired three small businesses.
"Our anticipation is that the mergers and the acquisitions will continue to build up again," said James P. O'Conor, chairman of the board. He predicted that "the large companies will become larger, and will continue to gain in market share."
Still, not all major companies have survived. In 1989, Merrill Lynch Realty merged with Prudential Preferred Properties, a privately held real estate company which is a franchise of Prudential Real Estate Affiliates.
And many of the survivors are suffering decreased revenues because of the recession. Grempler Realty Inc., for example, predicts sales of $500 million to $600 million this year, a significant drop from last year, when sales reached $740 million.
Coldwell Banker, meanwhile, has closed offices in Federal Hill, Pikesville, Catonsville and Glen Burnie within the past two years, according to Patrick Kane, senior vice president and regional manager of the company.
Such moves have prompted some small brokers to claim that the day of the dinosaur is over.
Phyllis Blum, sales manager of Fiola Blum, predicts that in the next few years the smaller firm will once again dominate the local market, as agents leave large companies to form their own, independent brokerages.
But others see space for both large and small companies.
"Basically, we're in a service industry, we don't own our product, so I think different types of services will appeal to different types of people," said Mary Bell Grempler of Grempler Realty Inc. "There will always be a place for the department store and the small exclusive shop, and you can't say one will take over from the other."