Pushed by national and global forces, San Diego’s maturing commercial real estate brokerage industry continues to evolve, with the DTZ brand making its first appearance in the local market following that company’s recent merger with Cassidy Turley.
The region also recently saw the arrival of Seattle-based Kidder Mathews, which opened its first Southern California office in San Diego’s Del Mar Heights neighborhood, widening what is already a large field of local market players.
The entrees exemplify two significant trends stemming from continued local and national improvement in real estate fundamentals: mergers and acquisitions among large companies looking to compete globally, and smaller players expanding their domestic footprints to meet rising demand for sales, leasing and other property services.
Expanded Access
Dan Broderick, who now heads DTZ’s Southern California operations from the same San Diego office where he formerly led Cassidy Turley’s local services, said synergy was a big factor in the combination of the two companies by their private-equity owners, a consortium backed by TPG Capital, PAG Asia Capital and Ontario Teachers’ Pension Plan.
The consortium in late 2014 acquired Chicago-based DTZ Group and Washington, D.C.-based Cassidy Turley, for an undisclosed price, and the merged companies became known simply as DTZ as of Jan. 1.
The two firms had little overlap prior to the merger, and the combination allowed both to obtain something they didn’t have before the deal — international market access for the former Cassidy Turley offices, and a significantly expanded U.S. presence for DTZ, whose stronghold markets historically have been in Europe and Asia.
“It’s going to give the local property investors access to foreign capital markets, and local tenants access to the global services that DTZ was already offering,” said Broderick, regional managing principal for DTZ. In turn, DTZ’s existing clients in places like London, Shanghai and Hong Kong now have access to information on prospective deals in Southern California.
Looking to Grow
DTZ retains four offices in San Diego County that employ 185 people, along with branches in Los Angeles and Orange counties with an additional 75 brokers and support staff. Officials said the combined company now employs 28,000 employees in 260 offices across more than 50 countries, generating $2.9 billion in annual revenue — putting it third globally behind CBRE Group Inc. and JLL.
According to information supplied to the San Diego Business Journal by local brokerage firms, Cassidy Turley handled approximately $2 billion worth of San Diego County transactions during 2013, up 23 percent from the prior year. For 2013, it was second in the local market to CBRE’s $3.5 billion for transaction volume.
Broderick said San Diego operations registered record revenue for 2014 (the company does not disclose revenue for individual offices), despite having 30 fewer brokers than in the last peak year of 2006 — about 80 compared with 110 eight years ago.
Growth could be ahead for local DTZ operations, he said, as the company in coming months looks to expand its presence in sectors, including apartments and retail.
The local Cassidy Turley office went through a series of brokerage affiliation and leadership changes in recent years, and DTZ is the third new big-company name to enter the local commercial brokerage fray in less than three years.
Newmark Grubb Knight Frank opened a San Diego office in 2012, after its New York-based parent firm acquired both Newmark Knight Frank and Santa Ana-based Grubb & Ellis Co. In 2013, the Canadian brokerage company Avison Young entered the San Diego market after acquiring some smaller firms in the Los Angeles area.
In May 2014, the San Diego office of Studley Inc. took on the moniker Savills Studley, after the New York-based company was acquired by London-headquartered Savills PLC in a $260 million deal.
Recruiting Talent
San Diego’s latest newcomer is Kidder Mathews, which recently opened an approximately 5,200-square-foot office on High Bluff Drive in Del Mar Heights, near Interstate 5.
“It’s a really good location, and I would be very pleased if we were able to outgrow it in a year,” said Managing Partner Mark Read, who heads Kidder Mathews’ new local operations. The 30-year real estate veteran held previous executive posts with Voit Real Estate Services in Orange County and CBRE Group in San Diego.
In his new job, Read is joined by three senior vice presidents who switched over from the San Diego offices of Cushman & Wakefield Inc. — Ron King, Joe McDermott and Robert Willingham.
CEO Jeff Lyon said Kidder Mathews already managed about 800,000 square feet of biotech space in La Jolla before opening its first-ever local brokerage operations, following other recent debuts in the San Francisco Bay area. The San Diego office brought its total to 10 offices in Washington, Oregon and California.
Read said Kidder Mathews plans to build its presence and stand out from the growing number of local brokerage players — both large and small — by recruiting talent with the help of its broker commission system.
While the employee-owned private company does not announce details, Read said the system allows strong-performing brokers to retain a larger share of commissions than might be possible with bigger companies that have administrative overhead or shareholder concerns to address.
“It’s a good arrangement because it better aligns the interests of the employees with the interests and the performance of the company,” Read said.