Another active year in building, apartment and land sales, along with solid leasing activity across all product types, made for a strong year among Orange County’s largest commercial brokerages.
The combined value of sales and leases at the 17 largest brokerage offices here rose from $24.6 billion to $28.8 billion, or 17.2%, in the year ended Feb. 28, based on the Business Journal’s latest ranking.
That’s the eighth annual increase in a row.
The latest annual ranking includes commercial property and land deals and deals done elsewhere but brokered by the companies’ OC offices.
The streak of gains follows four years of declines as the local industry felt the brunt of the commercial real estate downturn. Deal activity bottomed out in 2009, when about $11.1 billion in transactions was reported. Business for the area’s largest brokerages has since increased by about 250%.
All but two brokerages on this year’s list had year-over-year gains, as the overall number of reported lease transactions increased 6% and sales volume increased nearly 4%.
Ranked companies reported 751 brokers, up about 10% year-over-year.
Brokerage leaders say they’re optimistic the gains will continue, though most real estate cycles last six or seven years at best.
“It’s a really interesting time. Three years ago, if you’d asked me, I would have guessed we’d be nearing the end of the (current) cycle right around now. But the end keeps getting pushed out. I can’t really answer that question anymore,” said Kurt Strasmann, executive managing director of the OC and Inland Empire regions of CBRE Group Inc.
• CBRE retained the No. 1 position on the list as its two area offices worked on $5.5 billion worth of transactions, a 44% increase.
The area’s largest brokerage house handled the priciest single-property sale ever reported in OC, the $443 million sale of the new Five Point Gateway office campus in the Irvine Spectrum in August.
CBRE also worked on the related 20-year leaseback of two buildings on the campus to Broadcom Ltd., another transaction valued at more than $400 million.
Blockbuster deals weren’t the only factor driving growth, Strasmann said.
“The volume of business has been tremendous; it’s been exceptionally deep and diverse,” he said. “Deal count was up across the board,” including in the retail sector, which has recently faced challenges, Strasmann said.
CBRE’s projecting a new year of modest growth, but the brokerage is keeping its eyes open on the effects of interest rate hikes and OC’s low unemployment rate, which could hinder job growth.
Industrial Shift
A nearly nonexistent number of available industrial buildings for lease, thanks to strong demand and a shrinking product base as buildings are demolished for apartments and other uses, could affect the local economy, said Clyde Stauff, senior executive vice president at the Irvine office of Colliers International.
“We’re seeing a spike in building prices,” the average in industrial deals topping $200 per square foot, which was “one of the last barriers” in OC, Stauff said.
Manufacturing and distribution companies doing business in the area are taking note, a number of them looking for space in markets such as Corona, Chino and Ontario, he said. Industrial rents in those markets are about 20% below OC pricing on average, and sales prices are nearly 30% less.
“A lot of OC firms may have run out of runway here,” Stauff said.
• Colliers moved up one spot to No. 2 on the list as its Irvine office reported doing $3.5 billion in work, up 30%.
Brisk industrial-sector business fueled the local office’s gains. Stauff does a good amount of business just over the Los Angeles County line in La Mirada and Santa Fe Springs, in addition to local work.
One of his local listings is for one of the few large area industrial buildings available for lease, 6565 Valley View St. in La Palma, which is about 424,000 square feet.
Top-Level Changes
• Rounding out the top five on the list are Newmark Knight Frank, up one spot at $3.4 billion, a 30% increase; Cushman & Wakefield $3.3 billion, down two spots with a 0.4% increase; and Lee & Associates Realty Group, up one spot at $1.9 billion, up 2.2%.
The brokerages had big corporate changes during the year. Newmark’s New York-based parent company, which bought Santa Ana-based Grubb & Ellis in 2012 for $47 million, went public in December, raising nearly $260 million.
Cushman & Wakefield brought in a new top official for its OC and Inland Empire offices, Managing Principal Eric Paulsen, who previously served as an executive at Irvine-based auction firm Ten-X LLC.
Lee & Associates, which has three independently run OC offices, brought in a new managing director and president for its Newport Beach division, Chris Coyte, who’s been with the firm since 1989. He replaced Steve Jehorek, who stepped down as president after a 22-year tenure.
Newmark’s local numbers jumped, thanks largely to its capital markets team, which handled some of the largest office sales in OC last year, said Greg May, executive vice president and regional managing director. Deals it recently worked include the $120 million sale of Irvine’s 2600 Michelson Tower and the $147 million sale of Orange’s City Tower.
Cushman & Wakefield also benefitted from having one of the area’s most active capital markets teams, which worked on the $75.2 million Newport Corporate Tower sale and the $87.4 million sale of Irvine’s 18301 Von Karman Ave. office building.
Tenant Reps, Land Deals
Other than those moves, the largest local brokerage shake-up took place with the acquisition of Cresa Orange County by fellow tenant brokerage Savills Studley.
When the deal was announced in February 2017, the combined firm projected about $750 million in work annually out of the OC office, which is now in Newport Beach.
The company outdid the goal, with $850 million in work, good to retain the No. 11 spot on the list.
• The biggest jump in business percentagewise was at Irvine-based Land Advisors Organization, which handles land deals for developers and homebuilders.
The company’s activity increased 93% to $1.1 billion, pushing it up four spots to No. 9.
Among its transactions was the reported $104.7 million sale of land at Pacifica San Juan, the big housing development under way in San Juan Capistrano. The local office of Toll Brothers Inc. bought the land late last year for a 169-home project.
