Orange County’s top brokers kept waiting for long-term interest rates to rise last year and kill the hot sales market. Instead, they grew deal volume by nearly $4 billion.
The value of sales and leases at the 26 largest brokerage offices in the county rose 29% to $18.1 billion last year, according to the Business Journal’s ranking. They did it with virtually the same stable of brokers,668,as they did a year earlier.
Nineteen of the top brokerage offices saw volume rise. A few saw sales double. Sales were strong in the four main commercial property types: office, industrial, retail and apartments.
“I don’t think anyone expected interest rates to stay where they did for as long as they did,” said John Owen, managing partner in No. 5 Voit Commercial Brokerage’s Orange office. His office, which moved up two slots on the list, saw deal volume rise 46% to $1 billion versus a year earlier.
Indeed, last year the Federal Reserve Bank raised a key short-term rate five times to hit 2.25%, but long-term rates didn’t budge. The federal funds rate now is 2.75% after two more increases.
Long-term rates have edged up following a statement by the Fed that signs of inflation have picked up in recent months. Last week minutes of the Fed meeting were released, showing that the Fed’s Open Market Committee isn’t universally concerned about an inflation spike.
Brokerage offices that do a lot of sales dominated the top five.
The Newport Beach office of CB Richard Ellis Group Inc. held the No. 1 spot once again, with a 17% rise in volume to $1.9 billion in 2004, versus the prior year.
Sherry Bower, who heads CB’s operations in the county, said brokers were anxious at the start of 2004.
“There were three things that were looming that made us cautious,” Bower said.
Bower noted that leasing fundamentals had been deteriorating, there was anxiety about the political landscape, including terrorism, and there was a pending interest rate spike.
But regardless of how the leasing market was going, money flowed into real estate sales, she said. Near the end of 2004, office leasing picked up, she said.
Sales Strong in Q1
Sales have been very strong in the first quarter of this year, brokers said.
Kurt Strasmann, who heads Grubb & Ellis Co. in OC, said industrial leasing has picked up recently. And office leasing has been better since last year.
He said some of the larger, high-profile office buildings are starting to get multiple offers to lease the space. That’s been the norm for sales, but it’s the first time for leasing in several years.
Irvine-based Faris Lee Investments again held its No. 2 spot with a 46% increase in volume to $1.7 billion.
The brokerage has one office and focuses on buying and selling shopping centers. Shopping centers have been one of the hottest real estate segments of the past few years.
From its Irvine office, brokers with Faris Lee have been doing deals in other states, according to President Richard Walter. He said the company has sold shopping centers in California for clients who later bought centers in other states, getting a higher yield. Prices often are cheaper in other states.
Faris Lee brokered several deals at the $50 million level last year. In April, it brokered the $57.5 million sale of 360,000-square-foot Best Plaza Shopping Center in Cerritos to private investors.
In September, Faris brokered the $62 million sale of Crossroads Marketplace, a 264,000-square-foot center in Chino Hills, to San Francisco-based Krausz Cos.
The Anaheim office of CB Richard Ellis jumped seven spots on the list to No. 3. It posted a 151% gain to $1.3 billion in deals last year. The gain is eye-opening, since the Anaheim office lost eight brokers during the past year. It has 45 brokers.
A spokeswoman for CB Richard Ellis said the growth came from an uptick in leasing. The unit also brokered Maguire Properties Inc.’s buy of the sprawling Park Place complex in Irvine.
The Irvine office of Marcus & Millichap Real Estate Investment Brokerage Co. moved up two slots to No. 4 on a gain of 49% to $1.1 billion in deal volume. The office only does sales, mostly of shopping centers and apartments.
Voit’s Owen, whose Orange office saw a big jump in sales, said housing developers scooped up industrial parks near Angel Stadium of Anaheim at the end of last year.
Anaheim has created special zoning near the stadium to allow for housing mixed with shops and offices.
The Aliso Viejo office of Lennar Corp. last year bought two area office parks for $70 million. Voit Commerical Brokerage brokered the sale of Golden West Business Park and Gene Autry Business Park,they totaled 17 buildings on 17 acres.
Three brokerage offices on the list posted a decline in sales last year. No. 14 Irvine-based Sperry Van Ness fell from the No. 3 spot with a decline of 50% to $540 million.
David Frosh, president of Sperry Van Ness, said the Irvine office did some mega deals in 2003, which made the comparison a tough one.
“As a company, nationally our sales volume was up 50%, which makes us one of the fastest-growing firms in our business,” Frosh said.
Sperry’s total also was probably impacted by the departure of retail broker Reza Etedali, who left in December 2003. He formed No. 9 Reza Investment Group, which said it did $775 million in deals.
One note about this year’s list: The Business Journal has added two land brokers: No. 7 O’Donnell/Atkins and No. 10 Hoffman Co. The addition reflects the pace of their sales of property that has existing industrial or office space, and is being sold for other uses such as residential building.
This year’s list was competitive, with three offices dropping off and two others who submitted results not making the cut of $190 million. Last year’s minimum was $85 million.
The three who dropped off were the Newport Beach office of Travers Realty Corp., the Irvine office of Beitler Commercial Real Estate Services and the Irvine office of HealthWest Realty Advisors Inc.
