Paul Massey Jr. co-founded the commercial firm Massey Knakal in 1988, and soon found out how ambition’s reach sometimes exceeds its grasp. Some clients, he says, had to be turned away because the young firm did not service the areas the clients coveted.
“We couldn’t service them outside the geographic areas where we were,” Massey says. “Now, that’s not a problem.”
Massey Knakal has 76 brokers working in the five boroughs, making it one of the five largest firms in New York in terms of the number of brokers it employs. The firm brokered more than 8.3 million square feet of property sales in the city from July 1, 2005 through July 1, 2006, with a value of over $2.29 billion.
The number of brokers working the commercial side at a New York real estate firm influences a firm’s reach in drawing and serving clients. But broker numbers are rarely the decisive factor in terms of a firm’s productivity. Some firms with fewer than 10 brokers close millions of dollars in deals every month.
Still, sometimes size matters
The Real Deal tracked the top 15 commercial brokerages working in every aspect of the industry — from retail to investment sales to leasing — throughout the five boroughs. As of September, CB Richard Ellis led the pack with 221 brokers, followed by Cushman & Wakefield with 180, and Newmark Knight Frank with 164. Massey Knakal was fourth, and Jones Lang LaSalle was fifth at 70. (The survey didn’t include commercial landlords, including landlords who may broker.)
It’s quality, not quantity
Giants like Cushman & Wakefield and CB Richard Ellis cast long shadows on New York commercial real estate. When big leasing and sales deals happen in the city, the two longtime rival firms are rarely far from them.
In late August, CB Richard Ellis announced it would market Stuyvesant Town and Peter Cooper Village for owner Metropolitan Life Insurance. The sale could set a national price record of around $5 billion (see Valuing the big deals: for what it’s worth in New York).
Cushman & Wakefield brokered the $1.72 billion sale of the MetLife building at 200 Park Avenue last year, a record for New York City.
Together, the two firms in August alone represented tenants in New York office leases totaling 868,185 square feet, or 54 percent of all city office space leased that month, according to The Real Deal’s Deal Sheet, which tracks commercial activity in New York.
“I think in a marketplace as big as New York City, size does matter,” says Mary Ann Tighe, CEO and president of CBRE’s New York tri-state operations. “Because, how can you know what’s going on in a market of this scale unless you have a lot of feet on the pavement telling you what’s happening on a minute-by-minute basis?”
Tighe did say other aspects of brokering matter as much as a firm’s size — including how the firm uses those legions of brokers — but she added that, ultimately, tenants, however large or small, want a brokerage with scope.
“It’s just as important for a small tenant looking for a very particular type of space,” she said, “to know what’s happening as it is for a global conglomerate to be able to service all of its different locations around the world.”
Recently, the Manhattan commercial market has had, month after month, the nation’s lowest vacancy rate at around 7 percent. At the same time, demand remains steady behind a strong local economy. Therefore, there’s a lot of work to go around, and smaller commercial firms have positioned themselves to seize this opportunity from bigger ones.
Ken Krasnow spent nearly two decades at Cushman & Wakefield, becoming head of its New York area operations. He left that job in December to become director of brokerage services, a position created for him by Trammell Crow Company.
Trammell Crow has international reach but a relatively small presence in New York City, with 24 brokers working in the boroughs. Krasnow told The Real Deal shortly after he moved to Trammell Crow that he would recruit fresh broker talent to the firm.
But Krasnow says that growing the firm’s broker ranks is not as important as growing the quality and the range of its services. In the hyper-competitive New York commercial market, clients want multiple services, he says.
“I think the issue is not necessarily the number of brokers,” Krasnow says, “but the amount of resources that the organization has. A lot more tenants today are interested in issues like strategic planning, alternative planning in workplace designs, and project management.”
Bigger firms fetch more leasing
Both larger and smaller firms can provide these services to tenants. Larger firms, though, may have an advantage when it comes to bigger, more complicated deals.
A deal like the Stuyvesant Town and Peter Cooper Village sale by CB Richard Ellis or the MetLife building sale by Cushman & Wakefield involve intricate negotiations that usually spread over several months, if not years. Tenants are reassured by a firm’s track record in managing such deals, experts say, and such track records can be built around the number of brokers in various fields of expertise at a single firm.
“The scale of a firm matters because most firms that are smaller in nature,” Krasnow says, “don’t have the resources to provide the consultative services in the beginning [of a deal] and the project management at the end. Tenants want a good broker to help them get a good deal, but then they want somebody to actually complete the project.”
This extended working relationship is especially true in larger leases where the square footage stretches into six figures and the space leased unfolds in Class A space.
In August, CBRE represented tenants on three of the four largest leases in New York, according to the analysis by The Real Deal. Six of the top 10 leases of August, the last month for which data was available, involved larger firms, including Cushman & Wakefield, CBRE and Studley, which has 52 brokers working in the city, more than all but seven firms.
And, in the biggest office lease inked in Downtown since September 11, both sides of the deal were represented by the two biggest firms by broker. Cushman & Wakefield represented Moody’s Investors Service in its lease last month of 600,000 square feet at 7 World Trade Center, where the leasing agent is CBRE.
“A lot of the corporate clients of the big firms require more than just transactional services,” says Massey of Massey Knakal. “To have other services under the same roof can be advantageous to the clients.”
Smaller firms find niches
Smaller commercial firms in the city, then, tend to focus on different aspects of the market — and to profit from their specialization.
Retail brokerage Robert K. Futterman & Associates’ 34 brokers aren’t enough to make the list of the city’s top 10 biggest firms in terms of broker numbers. But it’s been involved in some of the most high-profile retail deals in New York in recent years, including leasing the retail inside the Time Warner Center. Futterman is also the leasing agent for the retail inside the under-conversion Plaza Hotel and the under-construction 111 Central Park North, a new condo development that may set price records for Harlem when it opens next year.
Georgia Malone started her commercial firm eight years ago with herself, an assistant and a secretary. A former senior partner at a real estate litigation law firm, Malone kept her eponymous company small, with only eight employees working on the firm’s specialty — representing parties in off-market building sales.
“It’s contained at eight,” Malone says. “I don’t want to go above eight people.”
In late 2005, Georgia Malone & Company represented seller Baruch Singer in a $500 million purchase of 104 buildings in Upper Manhattan. In the 12 months before July 1, the firm worked on deals involving 118 buildings with a total property value of $845,000,000.
Malone says the small staff means fewer expenses and more profits.
“It’s how good the people are that work there and how well the company functions as a group,” Malone says about succeeding at a commercial firm. “I just think motivated employees are effective employees, especially when they’re well-compensated.”