Orange County’s largest commercial property managers saw their local portfolios take a modest hit in 2011, but in general they were able to counteract OC losses with gains elsewhere.
Total OC commercial space—office, industrial and retail—currently managed by the largest 25 property managers fell by a little more than 5 million square feet in the past 12 months, or about 2.8%, to 182.8 million square feet, according to this week’s Business Journal list.
The decline ends a two-year run of square footage increases for companies on the annual list, which employ close to 4,500 people locally in a variety of building management roles, an employment figure that’s up about 1% from a year ago.
Ten companies on this year’s list reported year-to-year increases in local property management business, while seven others saw declines in the square footage of their local space managed. Figures for four companies were reported to be flat, and another four are Business Journal estimates.
All told, the companies on the list manage a little more than 2,400 properties, just about the same as last year. The companies’ OC offices manage about 233 million square feet of commercial space—including space in properties outside the county—for a 1.5% overall increase from year-ago levels.
The relatively minor year-to-year changes in local and non-OC property management square-footage totals is a reflection of the nonexistent local development market of late, as well as a lack of large portfolio accounts changing hands, as that had been the case in recent years.
Industry watchers note that property management is essentially a zero-sum gain; if one company grabs a new office or retail client, it means that another company lost that business.
That’s especially true when there isn’t much development, making new opportunities scarce.
Turnover
The sale of a few notable local buildings over the past year has resulted in a handful of accounts changing hands.
Newport Beach-based RiverRock Real Estate Group Inc. grabbed the assignment for the office space at 2050 Main Street in Irvine after it was bought late last year by Boston-based institutional investor AEW Global.
AEW paid about $108.5 million for the 314,000-square-foot 2050 Main Street building in the priciest office sale seen in Orange County last year.
The new property management account helped boost RiverRock by three spots in this week’s list, to No. 19 with 2.8 million square feet of local space managed.
RiverRock also saw its total portfolio managed in OC grow from 13.7 million to 20 million square feet last year, the biggest percentage jump of any company on this year’s list.
Among other new accounts, the company added 3 million square feet of retail space in California and Arizona owned by Santa Ana-based Red Mountain Retail Group.
Along with higher-end buildings that are being bought up by institutional investors, the biggest source of new work continues to be management of distressed assets for lenders and special servicers, said Barry Katz, executive managing director of asset services for CBRE Group Inc.’s Newport Beach office.
“We think more (distressed assets) will be coming to market this year,” said Katz, whose company retained the No. 1 spot on this week’s list, with 47.6 million square feet of commercial space in OC.
About 80% of CBRE’s local property management accounts are for industrial properties, according to Katz.
Properties in financial distress are starting to work their way through the system a bit faster than before, Katz said.
Some distressed properties have been in limbo for three or more years before ownership issues are resolved, but a year or two seems to be a likely time frame for most properties now, he estimated.
Dominant OC landlord Irvine Company of Newport Beach retained the No. 2 spot on this year’s list despite having no new completed developments or local office buys to its name in 2011.
The company manages an estimated 33 million square feet of space in OC, the same amount as a year ago.
Irvine Co. is estimated to manage a little less than 53 million square feet companywide, with a little more than 400 buildings in its portfolio in OC, San Diego, Los Angeles, Silicon Valley and Chicago.
The only other company on this week’s list with a local portfolio exceeding 10 million square feet is Transwestern, which kept the No. 3 spot with about 12.7 million square feet of space managed here. That figure was down a little more than 3% from a year ago.
Download the 2012 OC’s TOP COMMERCIAL PROPERTY MANAGERS list (pdf)