A string of headline grabbing mergers and acquisitions made the past 12 months a year of change for Orange County’s top commercial property managers.
Total commercial space,office, industrial and retail,managed by the top 25 property managers in OC rose 17% to 188 million square feet in the past year, according to this week’s Business Journal list.
That figure’s deceiving, though. The gain stemmed from OC properties being sold and bought among local property managers. The percent of true square footage managed,not including building sales and buys,was flat last year.
Industry watchers note that property management is essentially a zero-sum gain. If one company grabs a new office or retail client, it means that another company lost that business. That is especially true when there isn’t much development, making new opportunities scarce.
Acquisitions were behind some of the biggest changes on this year’s list.
CB Richard Ellis Group Inc., already Orange County’s largest property manager, reinforced its No. 1 status with its November buy of Dallas-based Trammell Crow Co. for about $2.2 billion.
Trammell Crow’s Irvine office had been No. 3 on the previous year’s list, with 12.1 million square feet of space under management. Following the acquisition and almost 8 million square feet of new space, CB Richard Ellis saw its portfolio grow by 58% during the past year to 58.8 million square feet.
That’s about double the market share of the No. 2 property manager in the county, The Irvine Company.
The Irvine Co. continued its growth pattern seen in 2005. The Business Journal estimated a 7% gain in space last year to 29.5 million square feet.
The Newport Beach-based company also was one of the few property managers to see the fruits of office construction.
At its University Research Park campus at the University of California, Irvine, about 685,000 square feet of office space was filled last month, as Broadcom Corp. moved its headquarters there.
The Irvine Co. also added 17 office buildings, totaling about 2 million square feet, to its out-of-county portfolio, a byproduct of the $23 billion buyout by private equity firm Blackstone Group LP for Equity Office Properties Trust.
The county’s largest office landlord paid close to $1 billion for Equity’s San Diego former office holdings, making it the dominant landlord in the La Jolla submarket. San Diego is the Irvine Co.’s second-largest market.
The rapid trading of local properties once held by Chicago’s Equity Office contributed to changes on the list.
Los Angeles-based Maguire Properties Inc. moved to the No. 14 spot, up from No. 21, with a 33% increase to 3.8 million square feet. This figure doesn’t include its multibillion-dollar buy of Equity’s local portfolio from Blackstone in February. The buy has yet to close, but once it does, Maguire’s local space under management will balloon to nearly 10 million square feet.
As a result, Equity Office was left at No. 7 on the list.
Maguire has said once the deal for the Equity Office buildings closes, it plans to sell about 3 million square feet from the portfolio.
Who will take on that 3 million square feet of space is something to watch for next year’s list.
No. 15 Caribou Asset Management Inc., which runs the holdings of Santa Ana developer Michael Harrah, also saw some change. Caribou sold off about 300,000 square feet of space to free up funds for Harrah’s long-planned, 37-story skyscraper, One Broadway Plaza.
Harrah says he still owns about 80 buildings around Santa Ana, totaling about 4 million square feet. We’ve estimated his portfolio closer to 3 million square feet in previous years.
Local property managers also did well in growing their business outside of the county.
The total square footage managed by these companies’ OC offices, including space outside OC, grew by 11% to 258 million square feet last year. The companies on the previous year’s list only posted a 5% gain.
The big deals at the top of the list helped mask a year of slow business for most of the smaller property managers on this year’s list. The top four on this year’s list all showed year-over-year growth. In all, nine saw a gain in their commercial space managed. Six posted negative growth last year. Ten were flat.
No. 23 RiverRock Real Estate Group of Costa Mesa was the biggest newcomer to this year’s list with 2 million square feet of space. Its most high-profile new assignment is Costa Mesa’s Triangle Square mall, which had seen several property managers come and go until being acquired by Newport Beach-based Greenlaw Partners LLC late last year.
No. 6 PM Realty Group was one of the few companies outside the top four to show strong non-acquisition related growth, boosting its local business by 38%. The company’s Irvine office grabbed a number of deals recently acquired by Newport Beach-based developer WCB Properties, including Santa Ana’s Xerox Centre.
