BETTER TOGETHER? Many appraisers find opportunity in industry consolidation; others prefer small and lean.

The backbone of the valuation profession historically has been small, local shops run by hardworking entrepreneurs who spend years building up their business. Recently, the profession has moved in a different direction as a wave of consolidation has created larger and larger industry players.

This consolidation involves a variety of companies, including large real estate brokers building up the appraisal end of their business, valuation-focused firms expanding their talent base and geographic footprints, and member-owned franchise organizations bringing more firms on board to operate as national platforms. While there has always been some consolidation, it has accelerated in the past few years and resulted in a number of high-profile acquisitions.

All of this can be seen as a natural evolution of the industry. But it also can be viewed as a response to a fundamental reshaping of business in general. In all, it adds up to "a seismic change in the industry," says John D. Busi, MAI, president of Valuation and Advisory at the commercial real estate firm Newmark Knight Frank in New York. For some, this change is bringing new challenges, while for others "it's creating an abundance of opportunity," says Busi.

Consolidation: Why now?

While today's consolidation is significant, it is not entirely surprising. "This has always been a pretty fragmented cottage industry," says Chris S. Roach, MAI, CEO of the commercial valuation, advisory and assessment firm BBG based in Dallas. Even after the recent wave of consolidation, he says, "the largest player in this space still has less than 10 percent market share."

"Consolidation is the natural order of things in business," says Anthony M. Graziano, MAI, chairman of Integra Realty Resources, a commercial valuation, counseling and advisory services firm. "Fifty-four percent of the beer we buy is made by five manufacturers worldwide, we have three dominant wireless providers in the U.S., and 60 percent of the global soft drink market is controlled by Coke and Pepsi. What we should be asking ourselves is, why did it take so long for the valuation profession to start consolidating?"

The answer is twofold: changing client needs and changing technology.

"Our dominant clients have been consolidating," Graziano explains. "In 1984, there were more than 17,000 financial institutions that had a regulatory need for real estate appraisals. Today there are fewer than 4,700." These clients tend to be larger and have a broader reach, and typically want a service provider that can work with them on a nationwide scale. "They want to deal with the same vendor in 10 or 20 different markets, depending on where they are," he says.

In addition, many large lenders are working in global markets, extending their need for appraisal support across far-flung locations. Altogether, such factors "are forcing market-share consolidation in our business," says Graziano.

More generally, appraiser clients often are facing increased competition--and they expect valuation firms to help them gain an edge. "The days of lenders competing only on interest rate are long gone," says Roach. "They are competing on...