When the going gets tough, the tough get going. In real estate terms, that means the current market, with its impossibly low cap rates and rising interest rates is calling for some new strategies to unite buyers and sellers, and one such tactic, actually put into place a number of years ago, is paying off handsomely for CB Richard Ellis. A database of private client buyers throughout the country has assisted brokers at the company in closing some 2.8 million square feet of deals worth $468 million in Los Angeles County last year alone, said Carlene O’Neil, who, along with Mark Perry, heads the private client group for office sales in CB’s North Los Angeles region. The system works this way: CB brokers across the country register their qualified private client buyers into the system, noting the types and price ranges of the properties they are interested in. Brokers with properties to sell can then access the potential buyers and market to them. “It used to be you could stand on the roof of your building and see your next buyer,” said O’Neil. “Suddenly the private client has no qualms about purchasing outside his geographic area.” Ever since the stock market tanked in the early 2000s, investors have been transferring a greater portion of their assets to real estate holdings, increasing the number of private client buyers active in the marketplace. More recently, as real estate prices have soared in many markets, those buyers have found it necessary to widen their searches in order to meet their acquisition guidelines. That’s been especially true in the local market. Prices for commercial real estate have reached an all-time high, in part fueled by record low interest rates. Now, as interest rates have begun to rise, brokers say they are starting to see some resistance on the part of private investors who are often finding that the potential yield of an asset does not meet either their own investment criterion or those of the bankers they rely on for funding. By expanding their search to other markets they can choose from among more options within the price and property type range they seek. But the system, which has taken considerable expense and time to install, not to mention a change in the mindset of brokers, is not simply a short term solution to current market dynamics. O’Neil said that over 40 percent of interested buyers come from outside the local market, and that is not likely to change anytime soon. Just as other industries have become more global, so too has the real estate sector. Although CB was among the first brokers to institute its own network, particularly where office and industrial properties are concerned, others have been increasingly relying on outside services to provide similar information. At Cushman & Wakefield, for instance, brokers use such online listing services as Real Capital Markets and LoopNet to help listing brokers identify potential buyers. “We use the broker as the focal point as opposed to technology,” said Carl Muhlstein, a broker with Cushman & Wakefield. “It’s really a function of what the client wants and the property suggests.” Some brokerage companies are also working on instituting their own systems. “We’re doing it at Grubb,” said Mark Larson, who noted that he wrote the business plan for the CB system while at CB. “A lot of people are trying to copy it. It’s not as easy as it sounds.” Indeed, the “book,” a detailed description of properties for sale which is distributed to other brokers, is still the most commonly used marketing technique at many brokerages. CB’s network, first established in 1999, has grown from about 15 brokers to 250 brokers currently. “It has only recently really started to take off,” O’Neil said. “The larger the marketing distribution the better.” O’Neil notes that the system has also helped brokers to share information, opinions and advice. “If my seller has a question I will pose it to the group and share all of the e-mails I get,” she said. “People give solid, sustainable answers that they can back up. We really take care of each other.” REITs See Some Expenses Decline A real estate investment trust trade group survey has found that insurance premium costs for the industry have remained relatively stable compared to levels three years ago, with some types of coverage showing marked decreases. The group, National Association of Real Estate Investment Trusts, surveyed premiums and other details for directors and officers coverage, employment practices, commercial general and excess liability coverage, general property and environmental coverage as well as Workers Compensation. The survey found commercial general liability premiums have decreased from an average $1.4 million three years ago to $658,500 while limits rose 103 percent. Workers Compensation premiums decreased 75 percent since 2003, to an average $529,000 from $2.1 million three years ago while limits increased an average 24 percent. The study surveyed 61 NAREIT member companies. Studio City Complex BW Brody Affiliated Cos. reports that this month it will complete construction on a $20 million apartment complex in Studio City this month. The 66-unit luxury complex, located at 10901 Whipple St., will feature washers and dryers in the unit, stainless steel appliances, granite kitchen countertops and maple kitchen cabinets. Financing was provided by Principal Global Investors. The complex will be managed by The Eberly Co.
