The commercial real estate brokerage industry has been buoyed by a steep uptick in business as the economic recovery takes hold. The upturn has seen the largest firms in Los Angeles add to last year’s hefty sales and leasing volume – and has also resulted in a round of consolidation that has helped some of the big players get even bigger.
CBRE Group Inc. remains the largest firm ranked by sales and leasing volume in Los Angeles County, posting $11 billion in deal flow in 2014, a 1 percent increase over the $10.9 billion it tallied the prior year. (See The List, page 18.)
Ranking second was Cushman & Wakefield Inc., which, on the strength of a $3 billion, 50 percent increase in business from the year before, supplanted Eastdil Secured as the second-largest brokerage. That growth might have also served as the impetus for former parent Exor SpA, an Italian company that owned 80.1 percent of Cushman & Wakefield, to put it on the market in February.
By May, Exor had a $2 billion deal to sell its stake to DTZ, a global real estate services firm backed by private equity firm TPG Capital. The deal closed this month, and John C. Cushman III, whose family started the business and who held a portion of the stake not owned by Exor, stayed on as co-chairman.
The Cushman deal followed DTZ’s deal to buy Cassidy Turley last September. And in January, Jerry Porter of Boston’s Cresa and Jim Travers of Travers Realty Corp. merged their firms to form Travers Cresa.
Christopher Cooper, a principal and managing director at Avison Young in downtown Los Angeles, said the consolidation trend is being driven by the need to grow to capture more market share and appease public investors, who expect year-over-year growth.
“For Cushman & Wakefield and DTZ, they are going to try to step into the super-global, multiservice, multimarket arena,” Cooper said. “They are going to attempt to compete with Jones Lang LaSalle and CBRE in terms of handling very large, very complex portfolios throughout the globe, taking it from the Big Two to the Big Three.”
Mergers and acquisitions have their advantages. In 2011, Avison Young acquired Ramsey Shilling in a bid to gain a stronger foothold in the Hollywood and Tri-Cities areas, among the most active markets for adaptive reuse and redevelopment.
But some wonder whether mergers have become a fad, one that might have dark undertones for some.
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