Monday, December 15, 2003

Commercial real estate As the world commercial real estate market consolidates, independent operators are banding together to gain leverage against the really big companies. That's according to an article in The Wall Street Journal, ("Regional Firms Form Alliances As Large Brokers Consolidate", 9/17/2003). The article states: GVA Worldwide, a [Chicago-based] partnership of independent regional commercial real-estate brokers, is proving that consolidation at the top of the industry will send firms scrambling to join forces. Among the firms joining with GVA or being acquired by associates of GVA over the past year are: Kidder Matthews, the top Seattle commercial real estate firm Daum Commercial, a Los Angeles firm VCI Consulting, a New Delhi-based firm Saxon Law, a London firm Second London Wall Project Management, a specialist UK real estate firm Smith Mack, a Philadelphia firm GVA AsiaPac, a San Diego firm serving American and European companies in Asia Integral, the #1 firm in Shanghai According to the WSJ, the biggest motivator is the merger, last July, of two giants in the industry worldwide, #1 CB Richard Ellis and #3 Insignia Financial Group. CB Richard Ellis is itself the result of the 1998 merger of CB Commercial and Richard Ellis. At that point, Insignia had acquired Richard Ellis's UK operations. The new merged company, which is now branded as CBRE, has offices in 47 countries and has income of over a billion dollars a year. The other big player commercial real estate is Cushman & Wakefield, which is a mostly owned by Japan's Mitsubishi Estate Company. Other industry giants include Trammel Crow, Lincoln Property, and Grubb & Ellis, all of which are growing fast. The big companies have a big advantage over regional firms. They can serve the lucrative market of multinational companies who need real estate in many cities across the globe, the cream of the business. As with other industries, only the big can really serve the big. So a group like GVA keeps getting new partners, as the article points out. Regional firms used to having independence and a large share of their market are finding there is a third way, somewhere in between joining a large, international corporation and being a boutique. Some have simply been bumped out of partnerships by CBRE and Insignia's overlap. GVA Kidder Mathews was an Insignia strategic partner before the merger, and CB was its direct competitor. 9:23:26 PM

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