Taking the commercial pulse

Size means clout in New York, but niche brokerages also prosper

In commercial real estate, bigger is usually better, but the exceptions in New York are pleased to disprove the rule.

A compilation of data prepared by The Real Deal on Manhattan’s most prominent commercial brokerages found that the biggest firms usually do the greatest number of large deals involving the most money — but not always. And smaller firms are often quick to point out that size isn’t everything when it comes to corporate culture or carving out a niche market. The unscientific survey, which covers transactions from April 2006 to April 2007, follows a cover story earlier this year on the city’s residential brokerage companies.

The analysis of commercial firms and their brokers allows for sorting out players by size or specialty: mega-brokerages that do everything, mid-sized office leasing firms, building sales boutiques and retail leasing shops.

Most firms claim to be one-stop shops — even if a look at the business they’ve done in the past year indicates otherwise. Some tout their strength as niche players, pointing out that to have a specialty is the only way to survive in the ultra-competitive Manhattan commercial brokerage world.

The Real Deal gathered statistics from its monthly Deal Sheet, which compiles office and retail leasing transactions as well as building sales. The Deal Sheet charted the large majority of deals that occurred in the past year (see below).

Here’s a look at the different groups of firms and how they performed.

Giant generalists

Being a real estate behemoth is about continuous growth and capitalizing on the company’s reach and array of services.

The firms with the most commercial brokers in New York City — the ones handling giant corporate clients, vast portfolios and trophy Class A properties — are the big three: CB Richard Ellis, Cushman & Wakefield and Newmark Knight Frank. CB Richard Ellis had 245 brokers in the city, Cushman & Wakefield had 180 and Newmark Knight Frank had 150, the companies indicated.

CBRE finished first among all firms in total office leasing brokered in the past year for tenants, according to The Real Deal’s study.

In building sales, CBRE brokered more than $8.1 billion in deals, making it first in investment sales among the mega-brokerages. However, it finished behind boutique firm Eastdil Secured, which secured the top spot by brokering $14.7 billion in sales in the past year.

Eastdil’s rise to the top was partly a result of its brokerage role in a massive $7 billion portfolio purchase by Harry Macklowe, though CBRE had its share of massive deals too. More than half of CBRE’s investment sales volume came from the $5.4 billion sale late last year of the 110-building Stuyvesant Town and Peter Cooper Village complex, brokered on behalf of Metropolitan Life Insurance. That deal is reportedly the most expensive single asset sale in the country’s history.

CBRE, which also has a substantial national and global reach, took steps in December to further distance itself from its principal competitor, Cushman & Wakefield, with a $2.2 billion acquisition of Trammell Crow Company. The merger bumped the worldwide employee count at CBRE to 21,000 from 14,500, making it the world’s largest publicly held commercial real estate services firm. Last year, CBRE became the first commercial real estate services company to be added to the S & P 500 benchmark index.

The company is based in California, but CBRE has a large New York presence, thanks to brokers like Darcy Stacom, who spearheaded the Stuy Town sale. The Trammell Crow buy added 24 New York City brokers.

CBRE became the city’s largest firm four years ago after its purchase of brokerage Insignia/ESG. The Trammell Crow acquisition does not mark the end of CBRE’s efforts to expand, but future buyouts will not be of “enormous proportions,” a CBRE executive who requested anonymity said.

The company’s success in going public has other companies considering the same. CBRE started listing shares on the New York Stock Exchange in 2004, trading under the ticker symbol CBG.

“CBRE has proven that going public works, and the pressure to grow and access public market capital may cause us all to become public in the next five years,” said James Kuhn, 58, president of Newmark, which placed third on the list in terms of number of agents in New York City. Kuhn stopped short of saying his company would go public.

Cushman & Wakefield, the city’s second-largest firm in number of agents, finished second in total office leasing, third in building sales and fifth in retail leasing.

The firm brokered building sales valued at $2.7 billion in the past year, according to data compiled by The Real Deal. Much of that came from the January sale of 666 Fifth Avenue to Kushner Companies for $1.8 billion. Cushman & Wakefield represented seller Tishman Speyer Properties in the transaction.

Cushman & Wakefield is trying to nudge CBRE out of the top spot.

The purchase of a large stake in Cushman & Wakefield by an Italian firm earlier this year has primed the company for growth. IFIL, the investment group of the Agnelli family, which controls Fiat and numerous industrial interests in Italy, bought a 67.5 percent stake in the firm for $563 million.

Founded as a property management company in 1927 — some 20 years after CBRE was started — Cushman & Wakefield claims to be the world’s largest privately held real estate services firm, with 11,000-plus employees under the helm of CEO Bruce Mosler. The company has 192 offices in 58 countries, according to its Web site.

Barry Hersh, associate director of the Steven L. Newman Real Estate Institute at Baruch College, said the company was instrumental in developing a “team,” or group, approach to getting deals done.

“Cushman really pioneered the team approach,” Hersh said.

Big firms like Cushman & Wakefield are more resilient to downturns in the marketplace, and revenues are more predictable than they are at smaller firms.

But Cushman & Wakefield executives acknowledge that they are too big to be just specialists.

“We’re much too large to have a niche,” said Suzy Reingold, 59, executive managing director of Cushman & Wakefield’s New York City brokerage. “It’s important to have a lot of different areas of expertise.”

And because the companies are large, agents pitching deals sometimes overlap each other’s efforts.

“It can happen, but we try to monitor it,” Reingold said.

Newmark Knight Frank is smaller and attributes its prowess to a slightly different focus.

With a strong retail brokerage business, Newmark finished second overall in volume of retail leasing deals negotiated on behalf of tenants — bettering CBRE and Cushman & Wakefield, according to The Real Deal’s analysis — and placed third in office leasing. In terms of negotiating building sales, Newmark’s numbers lagged behind its two bigger rivals, and it finished in seventh place overall.

The company is also known for its management business, said Kuhn, the company’s president, who added that it specializes in certain types of building sales.

“We’re probably the leading investment sales broker for land for the university and hospital business,” he said.

The company, founded in 1929, has 165 offices worldwide and 5,300 employees, Kuhn said.

Newmark manages 40 million square feet of space, of which 7 million is owned by Newmark chairman Jeffrey Gural, Kuhn said.

Mid-sized office leasing firms

The office leasing market is much more sophisticated than it used to be, thanks to technology and the complexity of the leases.

Hersh said that this ratchets up the pressure on mid-sized firms who are competing for market share left over by the dominant firms.

Many of these firms are based outside of New York and are looking to establish more of a presence here. They face stiff competition.

Studley finished fourth among all brokerages — and first among the mid-sized firms — in the amount of office space it negotiated for tenants in the past year, followed by Jones Lang LaSalle and the Staubach Company, according to The Real Deal’s survey.

Jones Lang LaSalle, well known in many overseas markets, has a greater reach than its New York City presence suggests.

In New York, it also offers other services, like investment sales and property management, but it is primarily an office-leasing firm, said Stephen Schlegel, COO of the company’s tri-state area operations. In New York City, Jones Lang LaSalle has 70 brokers, the company indicated.

Headquartered in Chicago, Jones Lang LaSalle has 20,000 employees in more than 300 locations in 70 countries.

Its success here has “proven we are a New York business,” Schlegel said, though he acknowledged there’s room to improve. “I think the goal we have is to reinforce the notion that we are a local firm.”

Staubach, founded in 1977 by star Dallas Cowboys quarterback Roger Staubach, who remains chairman and CEO of the company, is also trying to boost its New York market share. Staubach entered the market 10 years ago, and it now has two New York City offices with 41 brokers. The company has 60 offices nationwide.

“We’re the organization that’s still up and coming,” said Peter Hennessy, 46, president of Staubach New York. “We still have a long way to go.”

But being a mid-sized player in New York commercial real estate can allow you to compete with larger firms in ways that capitalize on smaller broker ranks.

Jones Lang LaSalle, for example, has received good marks for its company culture. It was the only real estate company to make Fortune magazine’s January 2007 list of the 100 best companies to work for. The company placed 66th and received recognition for, among other things, its open office layout.

Jones Lang LaSalle gives “salaries that range up to low- to mid-six figures,” plus commission, Schlegel said. “We want people to feel as though there is a little more stability,” Schlegel said. The salary also assists in facilitating information sharing, he added, because the brokers are not fighting for a deal. “It’s not, ‘I eat what I kill, and that’s all I get.'”

Other companies believe in a more competitive environment.

“We’re a 100 percent commission, eat-what-you kill company,” said Michael Colacino, president of Studley.

Studley pioneered the concept of solely focusing on tenant representation, although they have done some landlord representation deals. In 1954, Julien Studley established the company. Nearly 50 years later, in his 70s, he sold the company to younger associates. Today, Studley partners are considering doing the same.

“I’d like to be bought out,” said Colacino, who runs the company with chairman and CEO Mitchell Steir.

In New York City, there are 65 brokers, according to the company. Globally, Studley has 300 brokers working in 19 offices.

At Colliers ABR, another mid-sized firm, there are 45 brokers in its one New York City office, which focus on smaller-scale clients. Globally, the company’s Web site says it has 9,327 employees in 241 offices.

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“Our sweet spot is autonomous decision makers that are involved in the process,” said David Hoffman, 44, one of two executive managing directors at the privately held firm.

Brokers at Colliers aren’t the biggest earners in the business, Hoffman said, but they feel financially secure.

“If I want to earn as much as I can, I wouldn’t be here,” Hoffman said. “We stay because you can sleep well at night, knowing that you have people around you that support you.”

GVA Williams, also firmly in the mid-sized bracket, is growing. The company recently merged with GVA Thompson Doyle Hennessey & Stevens, under the auspices of their national parent company, Williams Real Estate.

The firm has about 3,500 real estate professionals in 120 offices worldwide. The 80-year-old, privately held GVA Williams has 65 agents in its New York City office. Major clients include ADP and the Salvation Army.

Paul Milunec, a 27-year-old broker and associate director at GVA, said he likes the company for its “entrepreneurial spirit.” Unlike at Cushman & Wakefield, where Milunec was in the emerging brokers program, he said at GVA he is encouraged to talk to people outside of his formal team.

Grubb & Ellis, initially called William A. White, established in 1868, claims to be the oldest continuously running brokerage in New York City, though it is now headquartered in Chicago following a series of acquisitions that brought it to its present size. The company has a strong national presence and is also trying to improve its New York City image. “I think we probably could be a little more visible in New York City, as we are nationwide,” said David Arena, president of Grubb & Ellis New York. Emphasizing the company’s national reach, Arena said that Grubb & Ellis was the first real estate services company to go public in the 1990s.

In its two Manhattan offices, there are 54 brokers, Arena said. Nationwide, the company has 5,300 employees. The company also does international work through affiliates.

Companies that are even smaller pride themselves on the service they offer.

Founded in 1920, Adams & Company, which placed in the top 10 in office leasing for tenants over the past year, is the leasing and/or managing agent for 27 New York City buildings. There are 12 brokers working out of the East 37th Street office.

“I think that we’re a smaller operation that still gives the ultimate in professional service,” said David Levy, a principal at Adams & Company.

Also on the small side is Hidrock Realty, which has a five-broker team that specializes in leases for apparel and accessories companies, as well as restaurant and retail clients. Its office is in the Garment District.

The company is laid back.

“The culture here is very loose. I feel that business is hard enough. We certainly don’t want to make it any harder than it has to be,” said Abraham Hidary, 29, Hidrock’s president.

The 25-year-old firm is run by Hidary, his brother Eddie, 26, the COO, and their father, Jack, the CEO, who founded the company in 1982 after a career in the garment business.

Investment sales

The giant generalists can pack a big punch when it comes to investment sales, but that doesn’t mean smaller companies, like Eastdil Secured, can’t compete.

Indeed, Eastdil’s $14.7 billion in building sales deals brokered over the past year, according to The Real Deal’s analysis, was around $7 billion more than CBRE’s total and $12 billion more than Cushman & Wakefield’s number.

Eastdil represented Equity Office Properties in the sale of eight Midtown office buildings totaling 6.5 million square feet to Harry Macklowe for $7 billion.

“Eastdil considers itself an investment bank and focuses on large portfolios,” Baruch’s Hersh said.

“The firm maintains more of an investment bank mentality than a traditional commissioned-based brokerage house,” Douglas Harmon, senior managing director at Eastdil, said in an e-mail. “Eastdil was founded 40 years ago under the same philosophy it maintains today. Hire the best and the brightest in the industry.”

Massey Knakal Realty Services, meanwhile, is the New York City powerhouse firm when it comes to small building sales, and it has the fourth-largest number of agents in New York City after CBRE, Cushman & Wakefield and Newmark.

It also finished fourth on The Real Deal’s list in the value of properties sold in the past year, after Eastdil, CBRE and Cushman & Wakefield.

The company typically handles small- to medium-size deals in Manhattan and the outer boroughs with an average sales price of less than $20 million. In part owing to its small deal size, the company did the most sales of any of the commercial companies.

Compared to many of the other brokerages out there, the company is a relative newcomer. It was founded in 1988 by Paul Massey Jr. and Robert Knakal when they were in their 20s and working as agents at Coldwell Banker Commercial.

Massey Knakal has 87 agents, Massey said, covering the five boroughs, and it is uniquely structured. Agents each cover exclusive geographic territories and track about 1,250 buildings. It allows clients to “get the local market every time,” Massey, 47, said. The company plans to expand into New Jersey.

Massey and Knakal are in the center of things — literally. They work in the middle of an open office, surrounded by the agents.

“Bob and Paul are just as active as any salesperson here,” said Robert Burton, 60, a senior director at the company.

Massey and Knakal started out with summer jobs at CBRE. As a result, the culture is similar to CBRE’s, Massey said.

“There’s a really good culture in the sense that it’s a work hard, play hard environment,” Massey said. The company has four recreational-league sports teams.

Another firm focused on building sales makes a big deal about being competitive.

Marcus & Millichap, which is headquartered in Encino, Calif., has 63 offices nationwide with 1,300 agents, including 85 agents in the Manhattan office. The firm also has a culture where agents work hard and play hard, and sometimes the two intersect, agents said.

“We have a culture of betting on everything,” said Mitchell LaBar, 47, a senior vice president and managing director at Marcus & Millichap. “There’s probably 10 different bets going on at one time.”

The office culture is a bit more buttoned up at other firms. As the industry has become more professional and the financial structure of deals has grown more complex, agents at Eastern Consolidated, which finished fifth on The Real Deal’s list for building sales, are following suit.

“We’re not like investment bankers, but we’re getting there,” said Eric Anton, 38, broker and Eastern Consolidated principal and executive director. The company is known for “doing really creative quiet deals. That’s our reputation,” Anton said.

Eastern Consolidated co-founders Daun Paris, 51, and Peter Hauspurg, 54, were colleagues when they starting their company in 1981. Two years later they married.

The firm typically handles $50 to $200 million investment-grade properties. There are 42 brokers in its East 40th Street office.

Offering an alternative work space and payment structure is Georgia Malone & Company. Georgia Malone, 53, who is the company’s owner and sole broker, has a salaried support staff of seven. “We’re professional but we’re pretty outside the box,” said Malone, a former real estate attorney. Her office, for example, was designed by a feng shui expert.

Despite the company’s small size, Malone has handled quite a few off-market deals for major owners, selling large investment properties. “Most of our deals are over a quarter of a billion dollars,” Malone said. While not on The Real Deal’s building sales list this year, in 2005 she said she brokered more than $1.1 billion in sales, including the $500 million sale of a group 104 Harlem and Upper West Side apartment buildings.

Retail companies

Thanks to their expanding presence in the city, big-box retailers really bring home the bacon for retail brokerage firms.

Winick Realty Group topped The Real Deal’s list for square footage negotiated for tenants in the year ending April 10. The firm has represented chain stores like Blockbuster, Duane Reade and Starbucks, and landlords like Rockrose and Trump.

Jeff Winick founded the company, which now has 45 brokers, nearly three decades ago. It scored a coup recently when the firm lured retail specialist Ben Fox, formerly of Newmark, on board as president along with two of his colleagues, a move that dealt a blow to Newmark Knight Frank’s retail business.

Jeffrey Roseman, 45, an executive vice president and principal at Newmark, said his retail group is still going strong with a team of 45 agents.

Robert K. Futterman & Associates, headquartered in New York, said it has 75 agents in New York and three offices in other parts of the country. It’s a niche player at the top of the retail game, with clients that have included the Plaza Hotel, Barnes & Noble and Diesel.

“We’re a very young, hip company,” said Robert Futterman, founder and CEO of the company. “I’m 48, and everyone is younger than me.”

“He likes the big-box, national,” said Faith Hope Consolo, chairman of the retail leasing and sales division of Prudential Douglas Elliman.

Consolo and Futterman both cut their teeth — and constantly vied for the top spot — at the now defunct Garrick-Aug, the first pure retail leasing company, according to brokers, which started about 30 years ago.

Futterman left Garrick-Aug eight years ago to start his own company, which placed third on The Real Deal’s list of retail leasing volume.

A small company that has specialized in retail and office leasing in the Downtown market since 1979 is Sinvin Realty, whose 10 sales associates handle clients in fields such as architecture, film and fashion.

“We’re more like a creative-type firm than a traditional office brokerage company,” said Bruce Sinder, 54, co-founder of the boutique company. “We’re a reflection of our clients to a large extent.”

Residential giant Prudential Douglas Elliman also lays claim to a significant portion of the retail business, ranking seventh on the retail list. Elliman’s retail strength is almost totally thanks to its recruitment of Consolo over two years ago.

“I represent established developers,” Consolo said. “I specialize in luxury with a focus on international and national.”

Go to charts: Biggest brokerages by number of brokers, top office leasing firms, top retail leasing firms and top building sales firms

Go to chart: Major commercial players: where they live and learned

Deal details: The Real Deal gathered statistics for this story from its monthly Deal Sheet, which compiles office and retail leasing transactions as well as building sales. Of the 27.7 million square feet of office leasing transactions estimated to have occurred in Manhattan from April 2006 to April 2007, according to brokerage reports, the Deal Sheet tracked nearly 19.6 million square feet of those deals. There were an estimated $41.4 billion in building sales in Manhattan, according to Real Capital Analytics; the Deal Sheet had seller representative data on $30.2 billion in transactions (of which $1.3 billion was in the outer boroughs). While no completely reliable estimate of total retail leasing transactions could be obtained (several brokerages were unable to produce ballpark estimates), The Real Deal tracked 1.5 million square feet of Manhattan retail leases. Costar tracked 398,000 square feet of retail leasing during the same period.

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