The combined value of sales and lease deals handled by the largest commercial real estate brokerage firms in Los Angeles County eked out a 0.5 percent gain in 2017, reaching $87.5 billion.
The near-flat performance – coming on the heels of a 22.9 percent hike in 2016 and a 13.1 percent gain the prior year – offered a sign that the commercial real estate market might have reached a plateau after a strong and steady run of nearly a decade.
Most of the top 36 brokerages on the Business Journal’s list, ranked by the dollar value of sales and leases in Los Angeles County, remained from 2016. The rankings of several firms changed as the market cooled and some high-earning brokers moved between companies.
CBRE Group Inc., the world’s largest commercial real estate brokerage, reported closing deals valued at $13-plus billion countywide in 2017, down 5.1 percent from the prior year but still a brisk pace – and enough to hold its No. 1 position.
“Overall sales volume reached a peak in 2015 and 2016, driven by the current economic expansion,” said Lew Horne, divisional president of CBRE’s Southern California, Arizona and Hawaii regions. “So, while year-over-year comparisons are slightly down, we’re still transacting at very high levels.”
Among the deals was an 83,000-square-foot lease in August 2017 for Paradigm Talent Agency’s new Beverly Hills office, a deal worth approximately $100 million, according to CBRE.
Deal activity in 2018 shows a still-growing cycle for the office sector despite many brokers’ comments likening the market to “the late innings of the baseball game.”
One of CBRE’s recent deals that illustrates the ongoing growth, according to Horne, was a 66,000-square-foot lease for coworking firm Spaces at the CBRE-owned Univision building in Westchester.
“Office market fundamentals are strong,” Horne said. “Unemployment is low, and there is expansion from tech and media companies focused on content creation.”
The county’s hot industrial market continued its fast pace last year with brokers handling about 11.7 million square feet worth of sales and leases countywide during 2017’s fourth quarter, according to data from No. 4-ranked Jones Lang LaSalle Inc. A land crunch and strong demand for warehouse and distribution space to handle e-commerce shipments continues to squeeze available space this year, leaving only a 1.4 percent vacancy rate in the recent second quarter. The county’s office vacancy rate during that time was just over 14 percent.
Movers and shakers
No. 2-ranked Newmark Knight Frank saw local deal values skyrocket more than 22 percent last year to nearly $12 billion, the company reported.
Phil Brodkin, an executive vice president and managing director at Newmark, credited the firm’s hires in recent years, such as CBRE alumnus Kevin Shannon, now Newmark’s co-head of U.S. capital markets, as a key to its growth.
“(Shannon) brought us instant credibility,” Brodkin said. “When you have someone like Kevin leading the charge, it helps your ability to recruit.”
Other Newmark hires over the last two years include John McMillan from Cushman & Wakefield, which was No. 6 this year; Bill Bauman and five other brokers from No. 5-ranked Savills Studley; and Eric Lastition and Geoff Ludwig from No. 7 Colliers International.
Brodkin, a veteran of Regus Group Cos.’ executive suites unit and CBRE, estimated Newmark has hired up to 30 brokers in recent years and plans to hire more.
Shannon led Newmark on its representation of a joint venture of New York-based real estate investment firm Rockwood Capital and Newport Beach-based Marshall Property & Development in the roughly $117 million sale in December 2017 of Campus 2100, a three-building, 203,000-square-foot office complex in El Segundo. Also this year, the firm negotiated a long-term lease for the Figueroa at Wilshire, a 58,000-square-foot office building in downtown Los Angeles, for law firm Seyfarth Shaw.
No. 3-ranked Eastdil Secured moved up one spot on the list despite seeing the value of its local deals sink nearly 16 percent year over year to just over $7 billion.
The New York-based firm, whose local office is in Santa Monica, this year represented private equity firm Carlyle Group of Washington, D.C., in its $151.5 million sale of the 375-room DoubleTree by Hilton Hotel and its two acres of land in Culver City.
One of its current listings is reported to be Wilshire Courtyard, the two-building, 1 million-square-foot office campus on the Miracle Mile. It is expected to list for about $650 million by month’s end.
Jones Lang LaSalle rose two spots on the list this year, thanks to a 9.4 percent deals value increase to nearly $7 billion.
Changes at Cushman
Cushman & Wakefield is No. 6 on the list based on a Business Journal estimate. The firm changed how it tracks its deals starting last year, according to Andrew McDonald, president of the firm’s west region. Cushman now puts less emphasis on specific markets as it crunches data “across sectors, across regions and across our disciplines.”
The Business Journal’s estimate for the value of Cushman’s deals in Los Angeles County is $6 billion, unchanged from a year earlier.
Cushman & Wakefield represented both the buyer and seller when a Morgan Stanley fund in April paid roughly $103 million for Bridge Point South Bay, a 512,000-square-foot industrial space near Torrance.
The firm also represented Hanjin/Korean Air in June in the lease of 66,000 square feet at its Wilshire Grand building downtown to Arup, which will move its regional office there from Playa Vista. Colliers International helped represent Arup in that transaction. Colliers fell two spots on the list with $4.5 billion in local deal value in 2017, down 5.4 percent from the previous year.
Chicago-based Cushman also joined CBRE, JLL and Newmark on Wall Street with an initial public offering earlier this year. “Going public has given us access to additional resources,” McDonald said.
For reprint and licensing requests for this article, CLICK HERE.