Orange County’s commercial brokerages didn’t see a turnaround in 2009 but were able to stop some of the bleeding after a brutal 2008.
The value of sale and lease deals at the 20 largest brokerages operating here totaled $11.2 billion in 2009, according to this week’s Business Journal list.
That was down 10% from a year earlier, marking the third straight year brokerages here have seen a drop in business based on dollar value.
The list ranks brokerages operating here by dollar value of 2009 transactions done by their local offices. The figures include deals done in OC as well as those elsewhere handled by local offices.
Lower rents helped spur more deals: Leases by the brokerages were up 10.5% to 6,236. But most of the deals were short-term leases at relatively low valuations, according to brokers.
The number of brokers at the firms was down 1.2% to 680 in the past year. Non-broker employees were off 6.3% to 673.
Last year’s results could have been worse.
Brokerages focusing on representing tenants, helping lenders deal with distressed assets or doing work for out-of-town clients were able to ride out a tough 2009.
“It’s still a tenant’s market, and it should be for the foreseeable future,” said Randall Parker, president for Los Angeles-based tenant representation firm Travers Realty Corp. “It’s our opportunity to grow market share.”
Travers’ Newport Beach office placed No. 10 on this year’s list, moving up three spots after posting a 1.5% gain in leases to $398 million.
Still Sluggish
At the same time, building sales and landlord representation work—traditionally two main sources of revenue for area brokerages—remained sluggish in 2009.
2009 sales brokered by firms on the list were basically flat at 919 transactions.
This year is seeing more signs of life, according to brokers.
“A year ago, there was a lot of paralysis,” said Jeff Osborn, managing director for the Anaheim office of No. 1 CB Richard Ellis Group Inc. and head of the company’s office division in Southern California. “Now there’s a lot more activity. Maybe we’re not at (the bottom), but people can see an end in sight.”
Nationally, officials with No. 2 Santa Ana-based Grubb & Ellis Co. said they expect leasing to rise by 10% to 15% this year from 2009. Investment sales are projected to grow by 25% to 30%.
“There’s actually some potential for investment sales to be higher as lenders and owners begin to clean up their portfolios,” Grubb’s Chief Executive Thomas D’Arcy said on a recent conference call. “One thing that everyone must keep in mind is that 2009 investment sales levels were extremely low.”
The amount of leasing and sales done in OC’s brokerage offices last year is about 45% below the levels seen in the peak year of the local market, 2005, when close to $21 billion worth of deals were completed.
Last year’s 10% drop in sales and leases was just an aftershock compared to 2008, when local leases and sales came to a standstill during the peak of the economic crisis.
The commercial real estate brokerage industry here saw a 32% yearly drop in business from 2007 to 2008, when all but one company on our list reported a year-over-year decline in business or was flat.
Last year was more of a mixed bag. Six companies reported increases in business in 2009 compared to 2008, while 10 saw a year of declines. One company, No. 18 UGL Equis, was a new entry to this year’s list with unavailable year-ago data.
Three brokerages on the list didn’t disclose their 2009 results: Grubb & Ellis Co., No. 9 Reza Investment Group Inc. and No. 15 Sperry Van Ness.
The Business Journal estimated results for those three companies based on the overall declines seen in the industry last year, as well as input from market sources.
CB Richard Ellis retained the No. 1 spot on this year’s list. It posted a 23.5% gain in sale and lease transactions to $2.4 billion. The rise was by far the biggest on the list by dollar amount.
The company counts 95 brokers in its Newport Beach and Anaheim offices.
Without CB Richard Ellis’ increases, the remaining companies on the Business Journal list would have posted a 16% decline in 2009 business compared to a year earlier to $8.9 billion.
Brokers at CB Richard Ellis “responded to the challenge of the downturn. They started doing things differently” than before, Osborn said.
The brokerage’s local offices were helped in part by having a large number of national accounts that its OC brokers could tap into, Osborn said. Also, com-pleting sizable deals outside OC helped drive the increase in sales and leases, he said.
“We’re trying to be more client-centric and getting brokers to think not just about Orange County,” Osborn said.
An example is the company’s national retail investment group, whose Western region is run out of Newport Beach. The group, headed up by Senior Vice President Phil Voorhees, has been busy working on sales and acquisitions of distressed shopping centers on the West Coast in the past year.
Other retail-focused brokerages, such as Irvine-based Faris Lee Investments, No. 6 on this year’s list, also have adapted to the challenging market by expanding the scope of their deals to out-of-state transactions.
Faris Lee has more than $700 million in retail listings from sellers on its Web site. It closed more than 70 deals last year, a majority of them outside OC.
Despite the adaptation, the brokerage saw sales and leases fall 48% to $525 million.
Jones Lang
The Irvine office of No. 11 Jones Lang LaSalle Inc. saw one of the larger boosts last year, with a 19% increase in work to $397 million, pushing the company up four spots on the list.
The brokerage, which has consolidated its local offices following the 2008 acquisition of onetime competitor Staubach Co., kept busy with its tenant representation work, including a number of finance, automotive and medical device clients.
“A majority of our revenue was from companies that have a national presence. That helped us out,” said Executive Vice President Jeffrey Ingham, who heads up the company’s OC brokerage operations. “We’re seeing more activity (in 2010)—sales are up, and leasing for larger tenants is up. It may not be a true sign that the worst is over, but it’s a good sign.”
Jones Lang LaSalle also is picking up work dealing with local distressed properties, including the recent receivership assignment for Costa Mesa’s Pacific Arts Plaza office campus, which pre-viously was run by Maguire Properties Inc.
