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Brokers Face Sales, Leasing Value Declines in 2023

Commercial real estate brokerages again saw drops in lease and sales value last year, due to high interest rates and the rippling effects on the industry caused by the pandemic.

The transaction value of leases and sales by Orange County’s top 18 brokerage firms slipped 3.2% from the year prior to $44 billion in 2023, according to this week’s Business Journal list.

The decline marks a continuation from the year prior when lease and sales value of OC brokerages fell 6.4% to $45 billion in 2022.

The drop in transaction value was primarily driven by a decrease in sales. OC brokers in 2023 oversaw 3,751 total sales, a 9% decline from the year prior.

Last year’s local downturn also reflects the slowing national market.

High interest rates have deterred transactions by keeping property values down. Moreover, valuations for buildings in the office and some parts of the retail sector remain stubbornly low, as a result of slow return to work and the rise of e-commerce.

Cumulative transaction volume in commercial real estate across the U.S. in 2023 declined 49% last year, to the lowest levels seen since 2013, according to data from real estate software firm Altus Group.

CBRE Tops

CBRE Group Inc., the top brokerage on this year’s list, posted a small dip in sale and lease transaction value: down 5.8% to $7.6 billion. Sales for the Dallas-based firm, which has a sizeable regional office in Newport Beach, slid 32% to 237.

Leases slipped 3.7% to 1,445.

“The slight decline is consistent with the market ups and the normal ups and downs of the business,” a CBRE spokesperson told the Business Journal.

The firm’s largest local deal last year was the $174.2 million trade of 38 acres of industrial land at Irvine’s Great Park Neighborhoods between seller Five Point Holdings LLC (NYSE: FPH) and buyers Tishman Speyer and Dermody Properties.

Housing Wins

Though most of the top local brokerages reported declines in sales and lease value, a couple posted growth.

Land Advisors Organization, an Irvine-based brokerage that exclusively handles land deals, which ranks No. 9 on this year’s list, grew lease and sales value 50% to $1.6 billion.

The firm’s buyers, most of which are homebuilders, have had much success in the high interest rate environment.

Builders are buying down mortgage rates on the new homes they’re offering to incentivize buyers, many of whom are taking the bait, according to Eaton.

“New homes now make up an unusually large share of the homes for sale,” Eaton said.
Typically, newly built houses make up 10% of the supply of the residential market.

Recently, however, their market share has risen to around 30%, according to Eaton.

Our buyers “are building and selling at a high rate right now,” Eaton said. “Their demand for land on homesites is insatiable.”

One of those buyers was homebuilder Lennar Corp. (NYSE: LEN), which last October acquired 50 acres of the master-planned community of Green Valley in Perris. Land Advisors represented the seller, a joint venture between New York-based real estate investment firm Cross Lake Partners and Salt Lake City-based master developer Raintree Investment Corp. Financial terms of the deal were undisclosed.

Lennar, which is headquartered in Miami, aims to build 191 detached single-family homes on the land. Sales for the community are expected to start this October, according to officials.

The only other OC brokerage that posted growth in lease and sale value was NAI Capital, which is based in Encino and has an office in Irvine.

NAI Capital, No. 11 on the list, reported a 17% growth in lease and sale transaction value to nearly $1.2 billion.

The company posted a 5.7% drop in 2023 leases to 397. The firm saw sales in 2023 jump 1.8% from the year prior to 116.

With its little changed lease and sales totals, NAI Capital’s increased transaction value can be largely attributed to pricier deals.

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