CB Richard Ellis/Whittier Partners added 10/Ten Post Office Square in Boston to its property management portfolio when it acquired Insignia/ESG last week.
The CB Richard Ellis acquisition of Insignia/ESG – finalized last Wednesday – will undoubtedly boost the already expansive portfolio of one of Boston’s top commercial real estate services firms, but industry watchers say that the merger is unlikely to cause a major upset within the existing competitive balance between real estate firms in metropolitan Boston.
CB Richard Ellis/Whittier Partners, the company’s Boston office, still has competition, and unless a core group of brokers leave following the merger to spin-off a new start-up firm, market share among competing firms won’t change much, according to David Begelfer, chief executive officer of the National Association of Industrial and Office Properties’ Massachusetts chapter.
“I don’t think there will be any negative impact,” he said. “It always could happen but I don’t see in the cards any major sprouting of new companies because of this merger.”
CB Richard Ellis, based in Los Angeles, is one of the largest commercial real estate services firms in New England. It manages 44 million square feet of space in New England alone. The merger with Insignia will add 1.8 million square feet to the property management portfolio locally.
On the brokerage side of the business, the combined company employs 86 licensed brokers in Massachusetts, up by 25 after the merger with Insignia.
Kevin M. Doyle, chief operating officer and co-managing partner of CB Richard Ellis, expects that about 80 percent of local Insignia brokers will continue on with CB Richard Ellis. Some have already left for other brokerage firms or other endeavors since the merger was announced earlier this year, he said.
Doyle, along with co-managing partner Andrew W. Hoar, will lead the New England team, which includes 373 professionals in leasing, financing, sales and management of all commercial property types, in addition to other services.
Insignia’s Stephen Lynch, Stephen Murphy, Greg Lucas and Timothy Halloran will now be principals at the CB Richard Ellis office. Thomas Walsh will serve as vice chairman.
Other top Insignia brokers who will stay on with CB Richard Ellis are Andrew Majewski, Michael Ripp, James Nicoletti, Mark Reardon, Timothy Lyne and Steven Clancy. Others include Kevin Kennedy, Richard Borden, William Crean, Jason Levendusky, Andrew Nelson, David McElroy, Patrick Cavanaugh, Bruce Grean, Michael Smith, David Corkery and Matthew Siciliano.
Things won’t change too much for those in the Insignia Back Bay office in Boston. That office, at 111 Huntington Ave., will remain open because of its heavy suburban focus, Doyle said.
The merger, while national and international in scope, will be unique in Massachusetts. The existing office of CB Richard Ellis is a blend between the international parent company and the locally founded Whittier Partners, established in Boston in 1900. The two merged in 1997 but Whittier Partners retained 50 percent ownership of the newly formed company. Some of Insignia’s employees will have the option of equity investment in the firm, a choice their counterparts in other parts of the country won’t have.
‘Complimentary Business’
Industry watchers say that the CB Richard Ellis and Insignia merger is part of an emerging trend of consolidations within the industry. Most agree that it’s the largest within the past few years, although some differ in opinion as to how much it will affect the Greater Boston market.
“It’s [the merger] part of a cleansing process in some ways,” said Edwin Shanahan, chief executive officer of the Greater Boston Real Estate Board. “More often than not, you see it at a time when companies are struggling because there’s not a lot of business.”
But while the merger boosted CB Richard Ellis’ position in the market, it’s far from a monopoly. Boston doesn’t have a single firm that dominates commercial real estate, Begelfer said. The fact that Insignia and CB Richard Ellis were both large, strong companies on their own also means that there will be less client fallout – customers chose them because of their reputation, size, reach and multiplicity of services, not because they were smaller, more attentive firms.
“These companies weren’t small to begin with,” Begelfer said. “They’re stronger than others and they were chosen for this.”
Some industry watchers downplay the effects the merger will have on real estate services competition.
“It will have no affect on the market whatsoever,” said Debra Lee Stevens, past president of the New England chapter of CCIM, a commercial real estate professional organization. “It’s always been the between 400 and 600 individuals [brokers] that matter, not the firm.”
Others, however, do foresee at least some trickle-down of clients who may view the merged entity as too large or simply be discontent that the firm with which they were doing business has changed.
“There will obviously be some opportunities,” said Richard Robinson, executive vice president of the Nordblom Co. in Burlington. “They’re both fine companies but I think our approach is to be consistent and not make a lot of changes. That helps us.”
The international merger between CB Richard Ellis and Insignia is valued at $431 million. The combined company employs 14,000 in more than 250 offices in 48 countries. It also has revenues exceeding $1.7 billion in 2002.
Last year, CB Richard Ellis and Insignia combined produced or directed more than $80 billion in sales and lease transactions, $9 billion in commercial financings, $14 billion in investment assets under management and more than 700 million square feet of property and corporate facilities under management.
While Insignia specialized in leasing, property management and financing, one of CB Richard Ellis’ global strengths is its research division. In Boston, CB Richard Ellis produces in-depth market research on all New England submarkets.
Locally, the companies had different strengths – Insignia had a strong brokerage group on Route 128, the South Shore and in Cambridge, while CB Richard Ellis has pockets of strength in downtown Boston, according to Hoar.
“It’s complementary business because we have new clients that we didn’t do business with before,” he said. “We’re expanding and broadening our existing relationship.”
