10/29/2008

Brokerage Cutbacks Seen Likely to Increase

The steady stream of property-broker cutbacks is likely to continue, and even speed up, in coming months.

As the volume of property sales plummets, brokers are being forced to reassess staffing levels. "I think everyone's waking up to what their third-quarter numbers are," said one senior executive at a national firm. "And they know the fourth quarter's going to be even worse."

The big three brokerages - CB Richard Ellis, Cushman & Wakefield and Eastdil Secured - are generally not filling vacant positions. CB, Cushman and DTZ Rockwood have also undertaken layoffs.

As recently as two months ago, most brokerages were expecting cutbacks to remain minimal because it appeared that property sales had stabilized. But the Wall Street meltdown caused many pending transactions to fall out of contract. A number of offerings were either put on hold until next year or pulled outright. With projected sales figures evaporating, major firms appear to have adopted the view that a new round of cuts must be made, either now or in 2009.

Some firms that had planned to selectively beef up staff this year have backed away from the strategy. For example, Jones Lang LaSalle wanted to continue acquiring regional brokerages and specialty practices this year, but now that idea seems to be on hold. The brokerage announced last month that it would cut 60-80 positions in the U.K., but so far has made no layoffs in the U.S.

DTZ Rockwood last week closed its three-member Chicago office and laid off a handful of brokers at its New York headquarters. In addition, plans to open a Boston office were put on hold. It was the second round of cuts for the company, which lost several core New York brokers in February as part of a staffing cutback of about 13%.

Meanwhile, Cushman last week cut two Chicago-based sales teams, totaling about 10 people. Those two teams, which focused on multi-family and land sales across the Midwest, were headed by John Simon and Peter Block. Cushman pros said those teams were part of about 200 layoffs companywide, focused mainly on support staff and analysts.

CB announced the elimination of about 200 jobs companywide two weeks ago, both through attrition and layoffs. Senior CB executives have conceded that further reductions are likely next year if sales volume continues to drop.

Sales of office properties nationwide, for example, declined by 71% in the first nine months of the year, to $34 billion from $116.4 billion a year earlier, according to Real Estate Alert's Deal Database, which tracks deals of $25 million or more.

Eastdil has trimmed its staff over the past few months, primarily through attrition. The company will likely end up reducing its staff by about 10%. Among the departures this month were multi-family specialist David Ash, who left to head a new West Coast office for fund shop Sterling Equities, and Washington-based managing director John Norjen, who became managing director of investments at Corporate Office Properties.

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