All About Strategy
Editor’s Note: Chain Store Age’s 23rd annual survey of Fastest-Growing Managers measures new domestic and international third-party management and leasing contracts obtained during the preceding calendar year (2011).
Now more than ever, retail real estate is not a business to be conducted without forethought. The days of gut instincts and seat-of-the-pants decisions have been replaced by the need to plan far ahead to guarantee a company’s continued growth.
That is the hallmark of Chain Store Age’s Fastest-Growing Third-Party Managers of 2011. From top-ranked CB Richard Ellis, with more than 48 million sq. ft., to virtually tied Vestar Development Co. and Mid-America Asset Management, their success came from decisions made years earlier to expand or refocus their businesses.
1. CB Richard Ellis
There are numbers, and there are NUMBERS. And CBRE’s grand total of 48.8 million sq. ft. of new management assignments worldwide (12.8 million sq. ft. in the United States), leading it to top our list, certainly counts as major growth.
Which leaves one basic question — how can a company possibly keep track of it all?
“It’s really very, very difficult,” acknowledged Todd Caruso, senior managing director of CBRE’s Retail Agency Services/the Americas. “We have a presence in almost every major and secondary market in the United States. But our sales and professional team are retail pros.”
The firm also has strict structures to ensure the best possible service, he added, forming Strategic Accounts and Asset Services divisions.
“We have the ability to be attentive to different client types and provide services when asked,” Caruso said.
And Caruso said he is committed to three main objectives: expanding CBRE’s large retail portfolio; providing additional services to existing clients through its Asset Services, Capital Markets and Project Management divisions; and recruiting more professionals in markets where he feels CBRE still needs an additional boost. That leaves plenty of room for future growth, despite an uncertain economy.
“I believe we will grow in a measured way — we don’t expect to have off-the-charts growth,” he said. “We do think the markets are loosening and that investors have opened their eyes to secondary markets.”
2. Jones Lang LaSalle Retail
Jones Lang LaSalle’s second-place ranking, with 15.4 million sq. ft. of new assignments, comes through both recommendations and diversification.
“Our best development team consists of our current clients,” noted Greg Maloney, retail CEO of Jones Lang LaSalle, Atlanta.
The growth also is a testament to the wisdom of expanding into managing open-air centers, which JLL began several years ago and continues to grow. Expansion is limited in its traditional regional mall category: Some 70% of regional malls are managed by REITs, and others are managed by their owners, Maloney pointed out. JLL manages 60% of the remainder. Now, in fact, JLL is restructuring itself to accommodate the potential of the open-air subsector.
“We’re moving toward becoming more local,” Maloney said. “Even in malls, we’re finding the local connections to be more important.”
Restaurants, in particular, require a local touch, as do ethnic markets.
“Our customer is changing. We have basically two generations below the baby boomers, and we need to adapt to that,” Maloney observed.
Perhaps the biggest misperception is that all of this is easy for a global firm such as Jones Lang LaSalle. But the company can’t take growth for granted.
“We don’t necessarily want to be the biggest,” Maloney said, “but we want to be the best as we continue to grow and expand into other areas of the retail sector.”
3. Fameco Real Estate
Persistence, flexibility and consistency: These are the keys to Fameco’s regular appearance as a Fastest-Growing Manager in the annual Chain Store Age survey. Part of the company’s 5 million sq. ft. of new management contracts came from the assumption of several centers originally built by Stanbery Development.
“It was Class A premium product, in a portfolio we’d been looking at,” said Larry Zipf, president of Fameco Management Services.
In fact, Fameco’s growth comes from leasing-only assignments, management-only contracts, and deals that include both services. In the last year, the company has taken on the management of projects as large as 570,000 sq. ft. (The Shoppes at Camden Town Center in Camden, Del.) and as small as a 2,700-sq.-ft. former KFC in Marlton, N.J.
“Our business is blocking and tackling,” said Adam Kohler, partner and head of Fameco’s Landlord Leasing/ Owner Representation division. “The company questions, ‘Can we do the best possible work for our client? And is it worth allocating our people and resources?’ Our business requires a lot of windshield time.”
And an increasing amount of business will come from Philadelphia, the result of allocating people and resources locally.
“In June 2011, we opened a physical office in Center City. In the final month of 2011, we landed 20 net new listings in Center City,” Zipf reported.
That has continued with 11 new listings in the beginning of this year, with more growth to come.
“Center City Philadelphia has been on an upswing,” Zipf said. “This is not a brand-new renaissance.”
4. Bayer Properties
How do you acquire 3.7 million sq. ft. of new management contracts? By cutting back on development projects. Ask fourth-ranked Bayer Properties.
Perhaps best known as the developer of the upscale Summit lifestyle centers, Bayer’s current growth came from a prescient decision in 2007 to focus less on new construction.
“We took that due diligence money to build our leasing staff. We thought we would become more diverse. We didn’t see the train wreck it became, but we did see a softness,” said Jeffrey Bayer, president and CEO of Bayer Properties.
While other companies were cutting back, Bayer was taking on seasoned pros to help them grow their existing third-party division.
“We were very aggressive in trying to staff ourselves with tried-and-true veterans,” Bayer said. “And it was not hard for us to talk to people and say, ‘We do it for ourselves.’”
The result has paid off with a diverse group of new assignments, including a 1.1 million-sq.-ft. turnaround opportunity at The Citadel Mall in Colorado Springs, Colo. In fact, the company has created a separate division for challenged properties, which can have a 75% different tenant mix from its Summit projects.
“I think we have some uncertai