The recent acquisition of Silicon Valley’s iconic Cornish & Carey commercial real estate brokerage by a big New York financial services firm speaks to the ongoing trend of consolidations in the Bay Area brokerage industry triggered by out-of-state acquirers attracted by the area’s hot technology sector.
This week’s announcement of the sale of Cornish & Carey, Silicon Valley’s premier commercial brokerage, to BGC Partners Inc., a leading global securities inter-dealer and real-estate brokerage based in New York, could spur even more transactions not just in the tech arena but also in retail and other areas as the company expands to serve BGC’s expansive customer base of institutional investors.
“We are in a very dynamic, special place that a lot of larger national people want to reach because the growth of revenues from the brokerage side is higher than 99 percent of other markets in the nation,” said Michael Messinger, principal and owner of Meacham/Oppenheimer CORFAC International, a commercial brokerage and property-management company based in San Jose.
The Cornish deal “brings more clients and investors” from BGC into the Bay Area market, said Dima Leshchinskii, an assistant professor at Menlo College. “That potentially can bring more commercial activity, and that can spill over to other properties.”
So as job growth and commercial development lead to an increase of employees in a certain community, Leshchinskii said, these people will need to live, eat and shop nearby, thus creating the need for housing, restaurants and retail space. “One drives the other,” he said.
But on the flip side, he said, property and other costs for employers tend to go up in such a scenario and could reach a point where businesses start seeking to “move to a cheaper place.”
The tech-centric Bay Area is a “very attractive market,” Leshchinskii added. “But is it already overheated? Some people say properties are becoming overpriced. What drives the prices is industrial growth, which overflows to real estate.”
Still, he said he sees the Bay Area market continuing its bullish nature at least into the near future.
Markus Shayeb, senior vice president of tenant advisory for Houston-based real-estate services firm Transwestern, said mergers and acquisitions will continue across the brokerage landscape as local companies look to have national and international reach while the larger outside firms want a share of the tremendous growth in the Bay Area.
“There’s definitely going to be more consolidations,” Shayeb said. He cited last month’s purchase of The CAC Group in San Francisco by Los Angeles-based CBRE as another prime example of that trend.
It makes sense for the bigger local brokerages “to be part of the national plate for the high-tech firms they represent,” Messinger said. Meanwhile, other homegrown companies such as Meacham/Oppenheimer continue to focus on local landlords and investors as well as retail and small industrial.
“For us, individual investors like to deal with boutique companies rather than big national firms,” he said. “We won’t change our format.”
Under the agreement with BGC, Cornish will become Newmark Cornish & Carey. Since 2010, Cornish had been an affiliate of Newmark Grubb Knight Frank, one of the largest commercial real estate services companies in the country that BGC acquired in 2011.
“Cornish & Carey is a trusted name among decision makers in technology, life sciences, finance and other sectors in Northern California and Silicon Valley,” Cornish President and CEO Chuck Seufferlein, who has been named president of Newmark’s western region, said in a news release. “As Newmark Cornish & Carey, our clients will benefit enormously from the exceptional breadth of services that [Newmark] offers globally.”
Newmark CEO Barry Gosin said in the release that his firm now has “an even greater ability to provide clients in the important Northern California marketplace the complete array” of services, including site selection, leasing advisory and global corporate services.
While it was a landmark transaction involving a Silicon Valley powerhouse, it didn’t come as a complete shock, and to some observers, the acquisition will not necessarily bring significant impacts to the overall brokerage scene in the Bay Area at least in the near term.
“Frankly, [Cornish had] been affiliated with Newmark for a while,” Shayeb said, and the acquisition of Cornish “has been rumored for quite a while. OK, finally it’s done.”
Shayeb also predicts business as usual for the most part in the brokerage world in the Bay Area as he described Cornish as being “the same folks doing the same thing” under a slightly new name.
What might be different is Cornish now having an even easier access to international clients that seek property deals and leases in the Bay Area, he said.
He added that Cornish can now officially join the likes of his own firm, Transwestern, CBRE and Jones Lang LaSalle that already have a national and international presence. But he still sees Cornish continuing to focus on its strength—Silicon Valley.
Established in 1935, Cornish grew to become a dominant player in Silicon Valley realty and brokered several high-profile deals, including major expansion projects for Google and other tech firms. In 2012, Cornish revenues totaled $135 million.
The sale to BGC provides “Cornish principals an exit strategy to reap the rewards of their hard work over the last 20 to 30 years,” Messinger said. “It’s a nice exit strategy to go back to being a broker or just getting a nice payout. They built up a strong brokerage firm. They did a good job.”