CB Wins Composite Ranking in Dismal Year

CB Richard Ellis last year retained its position as the nation's most-active brokerage across the five major property types, but a catastrophic drop in sales activity stole the luster from its crown.

The outlook for property trades this year is a little brighter - prices are closer to hitting bottom, the credit crunch is starting to thaw and a larger number of distressed assets are working their way toward liquidation. But even after two straight years with substantial declines in volume, the industry faces strong headwinds, and no one expects anything more than a modest increase in sales from the extraordinarily low base of 2009.

Only $27.2 billion of office, retail, multi-family, industrial and hotel properties changed hands last year, according to Real Estate Alert's Deal Database, which tracks trades of at least $25 million. That was down from $84.7 billion in 2008 and $242.7 billion in 2007.

In more bad news for brokerages, sellers completed a larger percentage of trades without a broker last year - 30%, up from 23% in 2008. That means only $19.1 billion of last year's volume resulted in commissions from sellers.

Why the lower share of brokered sales? It seems to reflect the high degree of distress in the market. When pursuing foreclosed properties, buyers are often approaching lenders, special servicers and receivers directly. That is reducing the need for sellers to hire brokers, although buyers still might use their assistance.

Brokers hoped that a steady stream of forced sales and recapitalizations last year would help compensate for the absence of listings from owners with no desire to sell into a falling market. But that failed to materialize, partly because lenders bent over backwards to modify loans and avoid foreclosures. That has caused the gap in the pricing expectations of buyers and sellers to remain too wide for significant activity to occur.

At some point, market pros said, something has to give. On the one hand, the sheer amount of distressed real estate means that supply has to increase. At the same time, high-yield funds sitting on billions of equity face the need to invest that capital over the next few years or return it to investors. But while that combination of factors will eventually force the bid-ask gap to narrow, brokers and investors said, they doubt it will happen to a significant degree this year, given the fact that lenders, regulators and lawmakers alike seem eager to kick problems down the road. Even if volume rose by one-third, to $36 billion, that would still be a poor year by historical standards.

CB brokered $4.4 billion of sales in the five major property types in 2009 to win Real Estate Alert's fourth annual composite ranking. CB, whose market share was 22.9%, finished comfortably ahead of Eastdil Secured, which had $3.2 billion of sales and a 16.6% market share. Rounding out the Top 5 were Cushman & Wakefield ($2.9 billion), Holliday Fenoglio Fowler ($1.7 billion) and Jones Lang LaSalle ($1.1 billion). But, in a reflection of the drastic decline in activity, volume for each of the Top 5 plummeted, from 61-76%.

As previously reported, CB led the way in multi-family and industrial sales, while Eastdil captured the office and retail rankings. Hodges Ward Elliott was the top hotel broker (see article above).

Apartment Realty Advisors, which retained sixth place in the composite ranking, was once again the top niche brokerage, with $1 billion of activity, all in the multi-family sector.

The ranking was based on transactions of at least $25 million that closed last year. The figures include sales of full interests or majority stakes in office, retail, multi-family hotel and industrial properties. When multiple brokers shared a listing, the dollar credit was divided evenly. Portfolio transactions were included if the sales price was at least $200 million or if it was known that at least one property was valued at $25 million or more. Brokers were only given credit if they represented the seller.

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