The property management sector continues to ride the coattails of a robust sales market. Property management assignments often flip along with building ownership, and the active sales market is creating a frenzy of activity as management firms work to retain and attract new business. More than $147 billion in office, industrial and retail properties were sold in 2004, and an additional $28.7 billion worth of properties sold in the first quarter of 2005, reports Real Capital Analytics.
“We've seen a lot more activity this first quarter than we saw in the first quarter last year, which is maybe a carryover for how sales activity heated up in 2004,” says Jana Turner, president of asset services for Los Angeles-based CB Richard Ellis Group.
New management assignments at CB Richard Ellis rose 38% in the first quarter compared with the same period in 2004. The company reported 989 million sq. ft. under management globally at the start of the year, making it No. 1 on NREI's Top 25 Property Managers survey.
Industrial properties have been an especially active sector for CB Richard Ellis. “We have a very keen investment sales industrial team across the country. They are selling a lot of these assets, and we have been fortunate in retaining management,” Turner says.
For example, CB Richard Ellis won a 3 million sq. ft. contract from ING/Clarion earlier this year after the firm purchased several industrial properties in Seattle as well as Portland, Ore., and Orange County, Calif.
| Company | Client | Date Awarded | Total sq. ft. |
|---|---|---|---|
| CB Richard Ellis | AMB Property Corp. | Q1 2005 | 25 million sq. ft. |
| Trammell Crow | BP | Q1 2005 | 3.5 million sq. ft. |
| CB Richard Ellis | ING Clarion | Q1 2005 | 3 million sq. ft. |
| Jones Lang LaSalle | Jacoby Development | Q1 2005 | 1.5 million sq. ft. |
| Jones Lang LaSalle | Pritzker Realty | Q1 2005 | 1.5 million sq. ft. |
| Trammell Crow | Harvard Funds | Q1 2005 | 1.5 million sq. ft. |
| Source: The companies | |||
Deal flow accelerates
Jones Lang LaSalle's portfolio of managed property has grown significantly over the last year. “We're seeing big activity levels,” says Peter Roberts, CEO of the Americas for Jones Lang LaSalle in Chicago. At the end of the first quarter, Jones Lang LaSalle's property management portfolio totaled 843 million sq. ft. — a 12 million sq. ft. increase over the end of 2004 and a 118 million sq. ft. gain year over year.
Jones Lang LaSalle has benefited from continued development in the retail sector. Earlier this year, the firm landed a contract to manage 1.5 million sq. ft. of retail, entertainment and restaurant space at the new Atlantic Station in Atlanta, a$2 billion, mixed-use project on 138 acres.
The rise in activity also is due to an active sales market. The firm was awarded the management contract for the 682,000 sq. ft. Mall of Abilene when the Texas property was purchased by Gregory Greenfield & Associates in January.
The frenzied investment market is putting added pressure on property management to boost the performance of assets. “To compete for and successfully secure assets, you have to be absolutely sure that every aspect of the investment is aligned to meeting or beating performas,” Roberts says.
Capturing consolidation
As the investment sales frenzy continues, an intense focus to boost property performance is creating new opportunities as both third-party and corporate clients move to consolidate real estate service providers.
In January, CB Richard Ellis landed a new 25 million sq. ft. industrial assignment when AMB Property Corp. opted to select a single property management firm for its 300 buildings in California.
Corporate business also is on the rise as more firms look to consolidate service providers. Corporate clients are demanding more centralized management, or a single-source provider to create consistency, efficiency and value throughout a company's entire portfolio, Roberts notes. Whirlpool opted to consolidate its service providers two years ago, selecting Jones Lang LaSalle as its sole provider in 2003.
In June, Jones Lang LaSalle renewed and expanded its service contract with Whirlpool to encompass 52 million sq. ft. worldwide. Jones Lang LaSalle provides a variety of corporate services to Whirlpool, including brokerage and consulting. The facilities management piece spans 1.2 million sq. ft. of property in the U.S.
Cadbury Schweppes, which is a London-based company, recently announced that it has appointed Cushman & Wakefield Healey & Baker in London as its sole real estate service provider for its worldwide portfolio, spanning 53 countries. Cushman & Wakefield will provide a variety of services such as transaction management, consulting and leasing advice.
“The requirements that we are seeing right now are tying together global practice and global solutions,” says Craig Morris, executive vice president for client solutions at Cushman & Wakefield in New York, which manages 410 million sq. ft. globally.