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Brokerages Saw Lots of Growth in 1999

Firms Say Economy Is a Major Factor in Success

BY TIM COFFEY

Business Analyst

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County real estate brokerage firms, like virtually every San Diego industry, benefited from an expansion in the economy driven primarily by the growth of the technology sector in 1999.

The top three firms on this week’s List of Largest Commercial Real Estate Brokerages all recorded more than $1 billion in local transactions.

All but two of the 15 companies on The List posted positive growth in the total dollar value of transactions and two-thirds finished with positive growth for the number of closed transactions.

Brokerages were ranked by total dollar value of all 1999 San Diego County transactions.

Burnham Real Estate Services Inc. cleared $1 billion in transactions for the first time. In the last two years the value of transactions for the firm has jumped 55 percent.

An “economy driven by a different set of drivers” was encouraging, said Burnham’s chief operating officer, Stath Karras.

And while industry growth is outpacing past performances, no one area is leaving the others behind, he said.

“(Sales and leases) have been pretty close to the same.”

– Firm Diversifies To

Expand With Economy

The best four performing brokerages on The List , CB Richard Ellis, Colliers International, Burnham, and BRE Commercial/NAI, respectively , all offered complete leasing and sales services. Burnham and CB Richard Ellis were separated by $149 million.

Because of the intense competition for clients among the brokerages in the expanding economy, Karras said the firm diversified itself from only representation to facilities management.

In all, Burnham offers a development division, an adviser and support group, a finance group, and a market/research division to compliment its facility management and landlord/tenant representation divisions.

“It supports our core businesses and allows us to seek other business,” he said.

Burnham represents more than 9 million square feet of San Diego’s leasable space and Karras expects the brokerage to represent more in the coming year.

Aside from commercial retail, office, and industrial leases and sales, a majority of the brokerages on The List offered apartment sales. Sales of apartment buildings are on the rise and Karras believes the trend will carry into this year.

“I think we’ll see a lot of activity in apartments,” he said.

– Some Companies Seek

To Represent Tenants

Karras stressed the “fair amount of development in the county” and described residential units as still “a good investment” because of the growing population and expanding economy.

“Single family residences in San Diego are a high-grossing activity,” he said. “We’ll see a lot more leasing.”

Increased leasing in 1999 benefited another company, Irving Hughes Inc., No. 5 on The List. The company’s transaction value grew 40 percent to reach $319 million and the firm’s number of closed transactions hit 200.

Unlike traditional commercial brokerages that represent landlords, Irving Hughes prefers to play on the other side of the fence and represent tenants. It’s a niche the brokerage hopes to exploit in the future. The brokerage deals exclusively in office and retail leasing and sales.

“I think that more and more clients are becoming aware of tenant representation,” said firm principal Jason Hughes.

The move by companies to put more money in research and development caused a majority of the firm’s clients to relocate to bigger offices.

– Growing Tenants Go

Outside of Downtown

“Most of our work last year (1998) came from the technology sector. Most , around 75 percent , was done downtown, Hughes said.

Now, he said, 75 percent of transactions consist of technology companies moving to suburbs.

Like Burnham, Irving Hughes has a facilities management division responsible for allocating improvement funds from landlords. Allowing client access to in-house construction specialists, gives Irving Hughes clients the security of knowing they aren’t getting ripped off.

“We’re always looking for ways to improve customer service,” Hughes said. “We’re always trying to help our clients. The days of being a tour guide are long gone.”

But success in the brokerage market wasn’t dependent on a firm’s ability to provide lease and sale services or diversify in 1999. Irvine-based Sperry Van Ness jumped six spaces on The List to become No. 10 this year.

The brokerage deals exclusively in retail and apartment sales. Local closed transactions increased by 68 percent from 1998.

“This is the best market in my lifetime, bar none this market has better balance than any I’ve seen,” 30-year real estate broker and Sperry Van Ness regional manager Jim Brady said, alluding to his branch’s success.

“It’s an exceptionally strong, vibrant market that hasn’t overheated.”

By sticking to sales, SVN is able to specialize in representing investors. The result has been a noticeable growth in the total dollar value of local transactions , up 42 percent , and lower employee turnover , Brady estimated 4 percent for his branch.

It was important to specialize, Brady said. Because there are so many different aspects to the brokerage industry, it was easy for agents to get lost.

“We (as a firm) can’t have success without their success,” he said.

SVN hit $100 million in transactions in 1999 based largely on the branch’s bullish approach to nice, but older county class B apartment buildings.

SVN should expect $100 million in 2000, Brady said, based largely on apartment sales and not the retail, industrial and land sale services the firm also offers.

He expects the commercial brokerage sector to grow as the economy continues to expand. However, Brady said, he’s been around the block enough times to know there are no guarantees and anything can happen.

“Let’s just say I’m senior enough to know the bumper sticker is true,” he said.

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