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Property Managers Build Portfolios in Brisk Market

A flurry of large office purchases by institutional investors, a smattering of development, and new out-of-town accounts helped boost the bottom lines of Orange County’s largest commercial property managers last year.

Office, industrial and retail space handled by the 30 largest property managers rose by about 16 million square feet in the past 12 months to 196 million square feet, according to this week’s Business Journal list, which ranks property managers by the square footage of commercial space managed locally.

That’s an 8.7% increase over last year’s list, which was smaller at 25 property managers. The list without the six additional entries would show year-over-year growth of about 2.8%.

The gains halt two consecutive years in which property managers reported modest drops in local business.

Their out-of-town accounts also increased. Companies reported that their OC offices now manage about 270 million square feet of commercial space—including properties outside the county—a 5.8% increase over 2012 levels.


Top Two Dominate

The top two property managers in OC—CBRE Group Inc. and the Irvine Company—stood apart from competitors in portfolio size, as has been the case for several years running, with a combined 42.8% of the total square footage represented.

The Newport Beach office of CBRE retained the No. 1 spot, reporting 51.5 million square feet of commercial space managed as of February, a 12% increase from 2012 levels.

Irvine Co., which manages its own buildings, remained No. 2 with an estimated local portfolio of 33.3 million square feet.

The real estate owner and developer, OC’s dominant landlord, added only one large building to its local portfolio, a 330,000-square-foot tower in Newport Center built for bond trading giant Pacific Investment Management Co.

CBRE benefited from the recent upswing in institutional investor interest in OC, with several offices that traded hands in the past year entering its accounts, said Barry Katz, managing director of asset services for OC and Latin America.

Shopping Spree

CBRE took over property management duties for properties like Tustin Centre, Centerstone Plaza in Irvine, and the Mission Ridge office complex in Mission Viejo, each of which a large national investor bought in the past year.

CBRE’s OC office also benefited from the addition of big-box industrial properties in the Inland Empire previously handled by its Los Angeles office, Katz said.

Not all institutional investors delegate their property management duties to third-party property managers.

n Chicago-based Equity Office Management LLC, the county’s most active office investor over the past year, keeps its property management services in-house.

The real estate arm of New York-based private equity giant Blackstone was estimated to have a local portfolio of about 1.5 million square feet under management as of February, placing it at the No. 26 spot.

Additions to the company’s OC portfolio include 1 and 2 MacArthur Place in Santa Ana, and the South Coast Corporate Center complex. Another property in the South Coast Metro area, Griffin Towers, closed last week.

It is Equity Office’s first appearance on the list since 2007, when it sold its nearly 6-million-square-foot local office portfolio to Los Angeles-based Maguire Properties Inc.

n Equity Office is one of the additions to this year’s list, along with the Colton Co., No. 17; First Commercial Realty Group Inc., No. 25; IDS Real Estate Group, No. 27; Stream Realty Partners LP, No. 29; and Interpacific Asset Management, No. 30.


Zero-Sum Game

Eleven listed companies had year-to-year increases in local property management business, while seven others experienced declines in square footage of local space managed. Twelve either reported or are estimated to have been flat over the past year.

The mixed results are no surprise, given

the relative lack of development in the region. Industry watchers say property management

is essentially a zero-sum game, meaning if

one company grabs a new office or retail

client, it means another company lost that business.

Less than 1 million square feet of commercial space opened in each of the past four years.

Companies reported managing 2,885 properties here as of February, an increase of about 330 buildings over last year’s list. The extra five entries were responsible for about two-thirds of the increase.

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Mark Mueller
Mark Mueller
Mark is the Editor-in-Chief of the Orange County Business Journal, one of the premier regional business newspapers in the country. He’s the fifth person to hold the editor’s position in the paper’s long history. He oversees a staff of about 15 people. The OCBJ is considered a must-read for area business executives. The print edition of the paper is the primary source of local news for most of the Business Journal’s subscribers, which includes most of OC’s major corporate and community players. Mark’s been with the paper since 2005, and long served as the real estate reporter for the paper, breaking hundreds of commercial and residential real estate stories. He took on the editor’s position in 2018.
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