Download the 2010 OC’s COMMERCIAL PROPERTY MANAGERS LIST (pdf)
In the past 12 months, Orange County’s commercial property managers grabbed new business from a variety of sources—including outsourcing work and distressed asset management.
Total OC commercial space—office, industrial and retail—currently managed by the largest 25 property managers grew by about 8 million square feet in the past 12 months, or 5%, to 184 million square feet, according to this week’s Business Journal list.
When the 25 companies on this year’s list are compared to themselves instead of the 25 companies on last year’s list, the gain in total square feet was even bigger.
The 25 companies on this year’s list—which includes two newcomers—saw total square feet rise by 9% compared to what they were managing a year ago.
Eight companies on this year’s list saw growth in the past 12 months, nine companies reported flat numbers and two saw year-over-year declines. Six were some form of Business Journal estimates.
The overall gains seen on this year’s list helped erase about half of the 17 million-square-foot loss reported on last year’s list, which roughly covered the 12 month period from April 2008 to April 2009.
In perhaps the most encouraging sign for the area’s battered real estate market, companies on this year’s list reported a 1.4% increase in local employees to 4,155.
That’s the first increase in workers for area property managers in more than three years.
“It might be a little bumpy for the next year, but I think that the worst of what we’re seeing is behind us,” said Sherry Bower, managing director for the Southern California asset services division of CB Richard Ellis Group Inc., which retained the No. 1 spot on this year’s list with 50.7 million square feet under management.
Shake-outs from the down market still managed to have a big effect on this year’s rankings.
Drop-offs
Two companies that long have been among the area’s largest property managers dropped off this year’s list: San Francisco-based RREEF Funds LLC and Los Angeles-based Maguire Properties Inc.
In 2008, those two companies had a combined 14 million square feet of local space under management.
RRREF announced last Septem-ber that it planned to outsource property management duties for its nationwide portfolio of office and industrial properties, totaling 120 million square feet. Its local portfolio
was turned over to Houston-based Transwestern.
As a result, it was no surprise that the biggest gain on this list was for Transwestern, which jumped 14 spots to No. 3 on this year’s list with 12.5 million square feet in its OC portfolio—a 364% rise. The number of local buildings it now manages is 42, up from 22 a year ago.
Likewise, distressed buildings either sold or turned over to lenders by Maguire during the past 18 months have cut back the landlord’s local holdings to about 1.2 million square feet, down from 7 million square feet.
The biggest local gainer from Maguire’s space shedding was Irvine-based LBA Realty LLC, which jumped up eight spots to No. 12 on this year’s list. The company, which has a 4 million-square-foot local portfolio—a 78% rise from a year earlier, took over a large portion of Irvine’s Park Place campus about a year ago.
Maguire’s portfolio shedding was a bit of an anomaly. In general, the number of distressed local properties that were foreclosed on last year was lower than many expected, said Jim Proehl, executive vice president and managing director for the Irvine office of PM Realty Group, No. 7 on this year’s list.
That could change this year as “lenders start to make more decisions,” Proehl said. “There are a lot of properties on the edge.”
PM Realty saw a 5% increase in the local space it manages. That jump was partly due to work related to distressed buildings taken back by lender Bank of America Corp., including buildings of bankrupt developer Opus West Corp.
Like Transwestern, No. 1 CB Richard Ellis has benefited from larger owners opting to outsource their portfolio management business, said Cindy Burger, managing director for asset services in CB Richard Ellis’ local region.
On a national basis, CB Richard Ellis took on some 70 million square feet of RREEF’s space, including buildings in Northern California and the Pacific Northwest.
Locally, the company gained 14 million square feet of office and industrial space here and in Central California owned by Sacra-mento-based Panattoni Development Co. when the company opted to outsource its property management services about a year ago.
That extra business helped boost CB Richard Ellis’ local portfolio by nearly 4% to more than 50 million square feet. That’s roughly the combined size of the three next-largest property managers on this year’s list.
Moves by RREEF and Panattoni to outsource property management were counter to the general trends seen of late.
In general, outsourcing of property management duties usually was done by smaller companies, rather than larger institutional owners, Burger said.
Looking for Business
Still, “in our line of business, people are always looking for cost-effective ways to manage their buildings,” Burger said.
The changing market has forced property managers to rethink the way they look for business, said John Combs, founder of No. 24 Newport Beach-based RiverRock Real Estate Group Inc., a commercial real estate management and leasing company that started up operations in 2003.
“The days of (building owners) sending out eight RFPs is over,” said Combs, whose company manages 2.4 million square feet of OC-based office, industrial and retail properties.
Until a few years ago, buildings were changing hands at a quick rate, giving property managers plenty of opportunities to grab new business if they partnered with the right buyers.
That’s still a key source of business, Combs said.
“We’re trying to line ourselves up with the buyers of tomorrow,” Combs said.
But with sales moving at a sluggish pace these past few years, new business is just as likely to come from taking over work on distressed buildings, so the company’s worked to build strong relationships with court appointed receivers and special servicers, he said.
Download the 2010 OC’s COMMERCIAL PROPERTY MANAGERS LIST (pdf)
