By Sinead Cruise and William Kemble-Diaz
LONDON (Reuters) - Further consolidation of the global property services industry is inevitable, a senior executive at CB Richard Ellis (CBG.N: Quote, Profile, Research, Stock Buzz) said on Monday.
While a global dearth of debt has put the brakes on mergers and acquisitions in other sectors, the pace and logic supporting consolidation among real estate brokers remains compelling, Mike Strong, president of CBRE in Europe, Middle East and Africa, told the Reuters Global Real Estate Summit.
"Consolidation will continue ... unquestionably. We continue to make corporate acquisitions. We have completed five this year in Europe alone," said Strong.
Less than two years after CB Richard Ellis, the world's biggest property services firm, bought rival Trammell Crow Co. for $2.2 billion, Strong said the firm was still very much a predator of smaller companies.
He said the firm was looking to deploy a significant proportion of the capital specifically allocated for corporate acquisitions in Asia, Russia and elsewhere in eastern Europe, where he saw a bounty of opportunities to tap new revenues.
"There's nowhere we're not in. But it's about expansion," he said, identifying Asia as the biggest "land of opportunity" for
CBRE.
"It's stating the obvious, because it currently represents between 8 and 10 percent of our global business, and it doesn't need a genius to figure out from what's going on in those markets that there will be opportunities for property advisers," he said.
CB Richard Ellis has set up a joint venture with Chinese developer China Vanke to provide property management services to occupiers of Vanke's upmarket residential properties, the two companies said on Monday.
Earlier this month, CBRE's closest rival, Jones Lang LaSalle (JLL.N: Quote, Profile, Research, Stock Buzz), announced plans to acquire Staubach Co. for around $613 million, adding a further 14 new offices to Jones Lang LaSalle's 54-strong operations in the Americas.
JOBS
Strong said further consolidation in the sector would not necessarily herald the same threat of vast broker redundancies in the commercial property market as it has done in the UK's battered residential market.
"The residential market has clearly been very hard hit, because of the mortgage market position, but I don't think as things currently stand that the commercial market has been as badly hit," he said.
Strong said that firms with flexible remuneration and reward systems could adjust naturally to changes in the market without the need for redundancy but companies with high fixed costs of operation could find it difficult to survive the market downturn without cutting staff numbers.
"At the moment our headcount is up on last year. We continue to expand. We'll see how it goes," he said. Continued...
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