The big are getting bigger. Commercial real estate firms are continuing to gobble up smaller companies in their quest to strengthen existing services, client relationships and geographic reach.
But the broader trend behind the mergers and acquisitions activity is that “the big are also getting better operationally,” says Jim Groch, global chief investment officer and executive vice president of corporate finance and strategy with CBRE Group Inc.’s Los Angeles office. Since 2005, CBRE has acquired more than 70 real estate companies.
The leading global firms have been investing heavily for several years in building out platforms, management infrastructure and technology systems, as well as expanding nationally and internationally. Delivering multiple product lines consistently across the globe, with depth in all of the relevant areas, is not an easy thing to do. Those firms that have been successful in those efforts are raising the bar for client expectations.
“It is increasingly important to be able to deliver a broad set of services and expertise to clients,” says Joe Stettinius, the Washington, D.C.-based CEO of Cassidy Turley. The competitive nature of the industry has firms more keenly focused on acquisitions as a means to quickly achieve a greater breadth and depth of services.
Earlier this month Cassidy Turley closed on its purchase of CLW in Florida. Cassidy Turley’s Tampa office will combine with CLW’s existing operations, which include over 20 brokerage professionals and approximately 100 total employees. The acquisition also expands Cassidy Turley’s Florida presence by adding offices in Orlando and Jacksonville, and brings an extensive list of national corporate clients.
CLW is widely known for its strengths in corporate services and multi-market tenant representation capabilities. In addition, even though the firm is headquartered in Florida, 60 percent of its business comes from outside of the state. “We saw it as an opportunity for CLW to have a tremendous impact on our people across the country,” says Stettinius.
Going forward, Cassidy Turley’s goal is to continue to fortify its project and development management services and capital markets services. “If there is an acquisition that would allow us to expand those services more quickly or with less risk, we would certainly pursue it,” says Stettinius. Cassidy Turley also is eyeing opportunities to expand its geographic presence in Chicago and Seattle.
Geographic expansion on both a national and international level remains a key driver for M&A activity. For example, Canada’s leading commercial real estate firm, Avison Young, is continuing to use acquisitions as part of its strategy to expand in the U.S. In October, the Toronto-based firm acquired Raleigh, N.C.-based Thomas Linderman Graham Inc.
The acquisition of the 61-member firm allows Avison Young to expand more rapidly in southeastern U.S. with new offices in Raleigh and Chapel Hill, N.C. Over the past three and a half years, Avison Young has grown from 11 to now 43 offices in 35 markets and from 300 to more than 1,100 real estate professionals across Canada and the United States.
In addition to geographic expansion, firms are using acquisitions to fill out the depth of their expertise. For example, a few years ago, companies may have been making acquisitions to enter a new market. Now firms are making acquisitions to improve their position in a particular submarket.
In January, CBRE announced the acquisition of the commercial real estate services businesses of Atlanta-based Resource Real Estate Partners LLC and TPA Realty Services LLC. For CBRE, which already had an existing office in Atlanta, the acquisition enhances CBRE’s service offerings in the northeast Atlanta submarket, which the firm expects to leverage to drive even more growth in the Atlanta market. The purchase also adds key leasing and investment sales professionals in the region, as well as more than 13 million sq. ft. of office and industrial assets to CBRE’s Atlanta property management portfolio.
More activity ahead
Industry experts are predicting another busy year ahead for M&A activity. “It feels as though the pace is picking up a little, but that may be driven by more companies choosing to sell rather than more active buying,” notes Groch.
Firms shopping for potential acquisitions are still finding ample opportunities. A variety of factors are convincing existing firms that it is an ideal time to sell. For some, the increasingly competitive nature of the industry along with a slow recovery has made a sale an attractive exit strategy. In addition, firms that have in the past been part of broader affiliate networks, such as NAI, CRESA Partners or Colliers, are deciding that they would be better off becoming part of a single larger company.
“There are a lot of great acquisition opportunities out there,” says Stettinius. “The challenge is finding a firm that has the right chemistry and culture.”