Going Global… Major Commercial Real Estate Companies Are Expanding

New commercial real estate brokerages are launching in the United States, in what may be a sign that the market’s recovery is durable.

Australia’s UGL Ltd (UGL.AX), a huge property manager, plans to expand in the Americas. BGC Partners Inc (BGCP.O), which brokers bonds among investment banks, built real estate brokerage Newmark Grubb Knight Frank from acquiring and combining smaller companies.

These players offer a range of services for offices, shopping centers, and hotels, from helping clients buy, sell, or lease property to appraising to managing real estate globally.

The newcomers hope to rival the biggest real estate services companies such as Jones Lang LaSalle Inc (JLL.N) and CBRE Group Inc (CBG.N). Often upstarts hope to grow by acquiring smaller competitors in the highly fragmented industry, and hiring away established players.

But they could trip over their own growth plans if they overpay for acquisitions or hires, analysts said. They may also get hurt if the current economic recovery fizzles out.

“These companies that are making acquisitions will have some stumbling blocks,” JMP Securities analyst Will Marks said.

The companies say U.S. commercial property brokerage is a good business now because the market is recovering, and the pace of recovery could quicken. The United States has already moved past the pain that halved property values, even as markets in Europe and Asia are struggling.

“I’m a big fan of the U.S.,” UGL Chief Executive Richard Leupen said. “I have a belief that the outlook is still terrific in the medium term and we want to be part of it … It’s the largest property services business in the world by a long shot. If you’re in property, you have to be in America.”

Other foreign companies have been expanding in the United States as well. Canadian real estate services company Avison Young first stepped into the U.S. market in 2009; this year it opened five offices, including in New York and San Francisco. The company hired former Cushman & Wakefield CEO Arthur Mirante last month to build its New York, New Jersey, and Connecticut business.


The value of global commercial real estate available for investing is between $10 trillion and $15 trillion, with half of that in the United States.

The U.S. commercial property brokerage industry is fragmented with 801 firms brokering property transactions of at least $10 million in 2011, according to a recent report by Real Capital Analytics.

According to Real Capital, only six firms are global – CBRE, Jones Lang LaSalle, Cushman & Wakefield, Savills, Colliers International and Newmark Knight Frank, now called Newmark Grubb Knight Frank. The top three – CBRE, Jones Lang and Cushman & Wakefield – accounted for 35 percent of the $326 billion in sales brokered in 2011.

BGC recently acquired bankrupt Grubb & Ellis for about $47.5 million, according to a source familiar with the case. It merged Grubb into Newmark, which it bought in October 2011. The two acquisitions totaled about $150 million.

“We just sold to a company whose objective is to grow the company,” said Barry Gosin, CEO of Newmark Grubb Knight Frank. “Grubb solved our scale issue. We now have 100 offices. We’re going to hire a lot of people.”

BGC’s expansion into real estate has offset declines in the financial markets, said Howard Lutnick, CEO of BGC and sister company Cantor Fitzgerald CNTOR.UL, on a conference call this month.

UGL has expanded from its property management business, which oversees the real estate needs of everything from universities to government offices, hospitals and shopping centers. It wants to be a one-stop shop for its large corporate customers. It offers research, fund management, cleaning services and energy management.

UGL bought Boston-based facilities management company Unicco in 2007 and Chicago-based real estate services company Equis a year before that. At the end of 2011, it bought British-based brokerage DTZ, which had been placed into administration in the UK. DTZ has a big operation in China and is active in Silicon Valley.

“If you clearly want to become part of the global offering, you have to be in America, and you have to be big in America, and we’re still not big enough,” CEO Leupen said.