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REA
May 08, 2019  

JLL Faces Overlap With HFF's Chicago Team

JLL’s pending purchase of HFF has cast a spotlight on the two firms’ overlap in the Chicago office market, raising speculation that the merger could lead to broker departures.

The planned $2 billion acquisition is viewed as a logical move for both brokerages because their national capital-markets platforms are largely complementary. But in Chicago, both firms have strong office-sales teams that have battled for years over prime listings.

Market pros doubt that both teams would stay intact at the combined platform. Meanwhile, two other shops — Newmark and CBRE — have been actively seeking to supplement or replace their Chicago-area teams, creating viable alternatives for any brokers looking to move.

For now, it’s business as usual at both JLL and HFF, which continue to pitch new listings independently. JLL’s team is led by international director Bruce Miller and managing director Nooshin Felsenthal. HFF’s crew is headed by senior managing directors Jaime Fink and Jeff Bramson. Fink also co-heads HFF’s national office practice. Each team includes several directors and analysts.

One big unknown: Did any of HFF’s Chicago brokers sign commitments to stay on? As part of the merger agreement, JLL required that 52 unidentified HFF staffers, “including members of HFF’s executive committee, extended executive committee and certain other key employees,” sign three- to four-year employment agreements, according to company filings.

JLL was by far the most-active office broker in the city last year, capturing a 67% share of trades worth at least $25 million, according to Real Estate Alert’s Deal Database. Since the market revived in 2010, the firm has claimed the title one other time, in 2014, with a 37% market share. HFF held the top spot three times in the current cycle, most recently in 2016 with a 45% market share, as well as in 2013 (49%) and 2010 (36%).

Their major competitors in Chicago are Eastdil Secured, which was in first place four times since 2010, and CBRE, which has regularly appeared in second or third place. Each of the firms’ Chicago teams also covers the suburbs and other parts of the Midwest.

Downtown Chicago is the market where JLL and HFF are most competitive. In eight of the last 10 years, both firms ranked in the top four there. Their next most-contested market is the Dallas area, where both were in the top four in six of those years, followed by the Denver area and San Jose/Silicon Valley, where they both finished in the top four in five of the 10 years.

CBRE recently lost its Chicago team, whose big strength was in the suburbs, where it was tops in office sales each of the past three years. Brokers Paul Lundstedt, Dan Deuter, Tom Sitz and Cody Hundertmark jumped to Cushman & Wakefield in November.

Meanwhile Newmark, which has aggressively recruited top teams in other major markets, remains eager to plant a flag in Chicago, where it has handled only occasional deals.

JLL’s acquisition of HFF is expected to close in the third quarter.