It is always an interesting debate. There are people who believe strongly that the requirement for a real estate business to operate from a traditional retail premises is becoming obsolete in the age of Skype, iPads and cloud computing.

But before you jump to any forgone conclusions, there's some information you need to know. For almost a decade now I've been analysing the geography of market share as it relates to real estate. What does this mean? Real estate is a local game. There are definite geographic patterns in relation to where a business is located, and where it holds market share.

The graph below shows the listings for all agencies located in the suburb of Nundah in Brisbane. It shows the number of listings that they have in each suburb (orange bars) as well as the running percentage of sales for all agencies combined (blue area). This is over a time period of about 3 years.

You can see that 50% of the collective agency's listings come from the first 3 suburbs. To get an appreciation for the geography, below is a map which shows the geographic context of the suburbs.

Each red circle represents a suburb. The bigger the circle, the more listings held by Nundah-based agencies. It is obvious to see that the majority of these collective agency's listings are held in the suburbs of Northgate, Nundah and Wavell Heights. The respective market shares of each of these suburbs are relatively similar as well. In fact, Nundah-based agencies hold 70% of the stock in these three suburbs.

I call this pattern the "Volcano Effect". The Volcano Effect says that an agency's turnover will peak in its suburb of location, or primary market, and then gradually decrease as you move further out.

These shapes of market shares are fairly consistent across the country. There are some interesting exceptions, predominantly in regional centres - such as Newcastle, Cairns and Geelong - where volcano effects are less-pronounced. But as these markets mature, I think you will see more localisation of real estate.

So what does this mean for the relevance of a real estate premises? Some people may argue that these volcano effects are there simply because of the traditional model of real estate. But I have even looked at the distribution of market share for businesses that operate on a remote-model, and there are still, if not less-pronounced, Volcano Effects in their business - normally related to where their premises are, or in some cases, used to be!

So I believe that the premises of a real estate business has a significant role to play in an agency's success in a market. Less so from an operational point-of-view and more towards a marketing and recruitment focus. Your premises are the biggest billboard and statement to the market you have at your disposal. If perception is reality, then if your premises look like the market leader's then people will think you are the market leader. Not only sellers and landlords, but other agents too! Who wants to work in the office that has the laminated window cards that block out all natural light to the cave-dwellers within?

So perhaps the premises of the future will be a remote "operations centre" where administration and property management is located coupled with smaller retail hubs in strategic geographic locations. You might even start to see Google-esque premises that focus on employee engagement and culture with ping pong tables and sleep pods.

While some may argue that the margins of a today's real estate business does not allow for such extravagances, I would argue that there is more money wasted on letter-box drops to "Dear Homeowner" that could be better spent making your premises that little bit more attractive to both potential clients and potential employees.

There are already some businesses doing some innovative things, but I would watch this space because the residential real estate office of the future is going to be nothing like what it is today!

Business 2