Firms Expect Strong Growth to Continue This Year
The top commercial brokerage firms in Orange County saw another strong year in 1999, posting an 18% increase in the value of sale and lease transactions, according to this week’s Business Journal list.
Furthermore, based on interviews with many of the firms that made the list, activity continues to be strong so far this year.
“We track our work in progress and we have a pretty good fix on the next six months,” said Kevin Hayes, president of Staubach Co.-West, which was ranked No. 4 on the list with $687.3 million in the value of 1999 sale and lease transactions, a 48% increase from the previous year. “It’s pretty predictable and we’re showing very strong continued growth.”
Hayes credits the restructured Southern California,less reliant on aerospace and defense industry and more service-oriented,for the strong growth of the last few years; he said he does not see a slowdown or recession in the near future.
“I think our Southern California economy is so diverse and so robust as compared to any other major market, including Silicon Valley that I think we’ll see that train coming long before it hits us,” he said.
In addition to the 18% growth the top 25 commercial brokerage firms experienced as compared with last year, the business generated by these same firms is a much stronger 33% increase from the total volume of the 25 firms that comprised last year’s list.
Like the Staubach Co., most of the companies on this year’s list posted strong growth. Of the 25 companies, 20 posted an increase in their 1999 total value of sale and lease transactions, while only five saw a decline in business.
Posting some of the biggest increases were CB Richard Ellis’ Newport Beach office, which was again No.1 on this year’s list and saw business grow 35% to $1.62 billion. Other big gainers include No. 4 Staubach (up 48%), No. 15 The Saywitz Co. (up 34%), No. 18 Collins Commercial Corp. (up 35%), No. 20 Providence Realty Group Inc. (up 82%), No. 21 Julien J. Studley Inc. (up 38%) and No. 24 Medical Realty Advisors (up 33%).
Decliners included No. 9 Sperry Van Ness (down 21%), No. 11 Professional Real Estate Services (down 11%), No. 14 Voit Commercial Brokerage’s Irvine office (12%), No. 19 Marcus & Millichap (down 8%) and No. 22 Daum Commercial Real Estate Service (down 11%).
Brad Schroth, president of No. 11 Professional Real Estate Services (PRES), attributed his company’s decline in the value of sale and lease transactions to a changing focus away from the brokerage business in favor of a more active investment role.
PRES has taken an equity position in 21 buildings in the last six months and has a stake in another five buildings currently in escrow, Schroth said.
“So the philosophy to broker is there because it fuels the beast, but my goal is not to grow a brokerage operation but to grow a real estate entity that has all the different functions.”
One of those functions involves increased business from major Fortune 500 companies. Schroth said PRES is currently working with five such major firms looking to divest themselves of real estate across the country, a prospect that he said should translate into a significantly increased business for his firm.
No. 9 Sperry Van Ness’ 21% dip is a result of a pull-back in 1999 by REITs from their frenzied buying spree as well as a decline in the number of investment properties listed for sale.
“1998 was an absolutely banner year for sale transactions because there was a lot more buyer optimism and REITs were buying everything,” said Burton Young, president of the Asset Management Division of Sperry Van Ness. “They were heavily in the market, particularly in the first three quarters. By the fourth quarter, they were out of the market and have been out of the market since.”
Still, Young said he sees a return to the frenzied pace of 1998 so far this year, despite the fact that REITs continue to sit on the sidelines. Part of this optimism is based on Sperry Van Ness’ experience so far this year, Young said.
In 1999, the company’s Irvine office listed 102 properties for $1 million or more; so far this year, Sperry Van Ness’ local office has listed 40 such properties through the first quarter.
The number of brokers employed was relatively flat at the top 25 commercial brokerage firms on this year’s list, which saw payrolls increase by 1% to 628 brokers. The heightened activity, however, represents a 7% growth in broker employment as compared to the 585 brokers employed by the top 25 commercial brokerage firms on last year’s Business Journal list.
Overall employment similarly remained flat among the companies on this year’s list. A total of 1,071 employees were on the payroll of these firms, a 4% increase from last year. But, as with broker employment, overall payrolls increased sharply when compared to the companies on last year’s list, up 56%.
John Owen, a senior vice president with Voit Commercial Brokerage, No. 6 on this year’s list with $564 million in business (up 25%), said the improved climate of the last few years has led to renewed interest by college graduates in the real estate field.
“It’s not like it was in the ’80s in terms of the flood of resumes that used to come across people’s desks in those day, but it’s still a fairly attractive industry,” Owen said.
Still, Owen said that real estate companies have been hesitant to add a significant number of new employees, mindful of the many layoffs that occurred during the last recession. Instead, companies such as Voit Commercial,which lost two brokers, or 7%,are seeking to get more out of their existing employees.
“What the industry has mostly done over the last several years is increase productivity from its existing broker complement,” he said. “I think that, again, the emphasis for most of the firms has been increasing productivity by supplying brokers with better support tools such as (better) technology.”
This is especially true as the industry continues to mature, Owen said. Firms are relying more heavily on senior brokers who have spent years developing a stable of clients and are well versed in the industry, as opposed to bringing in younger brokers or staffers and investing heavily while they learn and develop an expertise.
“I think it’s reflective of the maturation of the industry,” he said. “The senior brokers are able to process more deals because of the technology and still deliver the same level of service to their clients. I think it’s what’s happening in a lot of industries.” n
