After years of a buying frenzy, local commercial real estate brokerages saw a $6 billion drop in sales and leasing business last year.
The value of sale and lease deals at the 19 largest brokerage offices here totaled about $12.2 billion in 2008, according to this week’s Business Journal list.
That’s a 32% drop from 2007 totals, and it’s more than a 40% drop from the county’s best-ever year, seen in 2005, when high-flying brokerages here did nearly $21 billion in business.
OC’s brokerage community hasn’t seen a year this slow since 2003, according to the Business Journal’s data.
All but one brokerage on this year’s list reported flat or a drop in growth. Three of the top five brokerages on this year’s list reported drops of 45% or more.
Among the top 10 brokerages on this year’s list, only one,No. 6 NAI Capital Commer-cial,reported a drop of less than 30% from 2007’s volumes. It came in at a 5% loss in business.
For the three brokerages on the list that didn’t report 2008 results,No. 7 Reza Investment Group Inc., No. 10 Marcus & Millichap Real Estate Investment Brokerage Inc. and No. 16 Sperry Van Ness,the Business Journal estimated declines that were in line with the
industry.
Right now, the industry “is struggling along. It could take 24 months before things return to normal,” said Jeff Osborn, managing director for the Anaheim office of CB Richard Ellis Group Inc. and the head of the company’s office division in Southern California.
Top Spots
CB Richard Ellis retained the No. 1 spot on this year’s list, despite a nearly 46% decline in business in 2008 to $1.9 billion.
Last year, the Business Journal opted to combine the deals from multiple OC offices of the same brokerages under one ranking, to better reflect the size and scope of some of the larger companies in the area.
CB Richard Ellis’ larger Newport Beach office saw a 48% drop in work to $1.3 billion, while its Anaheim office was down about 40% to $600 million.
So was the case for No. 2 Grubb & Ellis Co. and No. 3 The Voit Cos., which swapped spots this year.
Grubb & Ellis saw a 34% drop in business at its two local offices to $1.4 billion in sales and leases, while Voit’s commercial brokerage operations saw business fall 46% at its two OC locations to $1.2 billion.
The results could be worse than what was reported by the brokerages. Nationally, big office sales volumes were off nearly 70% from a year ago, while leasing activity was sluggish, according to CB Richard Ellis data.
Brokers in OC faced a second straight year of slow leasing in 2008, with shorter-term deals becoming the norm as tenants concerned about the future shied away from longer deals.
2009 might not be much better.
“It’s going to be tough going for the next year,” said Kurt Strasmann, managing director of OC brokerage operations for Santa Ana-based Grubb & Ellis.
The industry is used to working through lean times. During the previous recession in 2001 and 2002, brokerages here did less than $10 billion in business a year. Even then, institutional sales drove a big percentage of the area’s business, according to brokers.
That wasn’t the case last year. Leasing, while remaining slow, still held up much better than sales activity for commercial properties, which has stalled for the better part of a year due to tumult in the credit markets and big gaps between what buyers want to pay for buildings and what sellers are willing to part with them for.
The only brokerages that avoided the drop in business were two that specialize in representing tenants, rather than landlords.
No. 13 Travers Realty Corp. moved up three spots in the list, with $392 million in business, a 1.8% increase in volume.
No. 14 Studley Inc. moved up four spots this year, with a 22% increase in work to $343 million.
Employment
The local office of Studley is planning for more business this year. It has increased its staff since January and has added a retail line of tenant representation to its more established office and industrial practices.
It’s the first time the brokerage’s Irvine office has been fully staffed, said Royce Sharf, Studley executive vice president.
Studley’s gain in personnel stands in contrast to most of the brokerages on this year’s list.
Companies here reported a modest cut of about 2% in brokers, but a 14% drop in total employees, as other non-revenue producing positions were eliminated.
CB Richard Ellis, which employs about 265 people locally, down 10.5% from a year earlier, said many of its cuts occurred before last year.
“We were more proactive than some of the competition and started (reducing staff) 18 to 20 months ago,” said Osborn.
“We’ve been watching our dollars and cutting costs where we can,” said Jeff Moore, senior managing director of OC operations for CB Richard Ellis.
Brokerages also have been narrowing their focus to training brokers, keeping key clients and “not spinning our wheels on things that don’t make sense,” Moore said.
On a national basis, Grubb & Ellis announced a 100 person reduction of its 900 brokers, but few of those cuts were local.
The company’s also been making a sizable amount of cuts to its support staff at its Santa Ana headquarters. Figures from that Grubb & Ellis office, formerly the headquarters of NNN Realty Advisors Inc., aren’t included in our list.
More changes are likely to be on tap for next year’s list, as another slow year of business could lead to consolidation of some brokerages, or closures of others.
Last year saw one consolidation: No. 15 Jones Lang LaSalle bought Staubach Co.
In January, Sperry Van Ness, which was No. 16 on our list, said it would fold six offices, including its Irvine branch, into its West Los Angeles operations.
Local Sperry brokers,some of whom have moved to competing brokerages since the announcement,will act as “satellite brokers” and telecommute, the company said.
