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April 22, 2015

Cresa Chairman: You haven't seen the last of us in Silicon Valley

Silicon Valley Business Journal

Nathan Donato-Weinstein

Cresa Chairman Richard Rhodes told me today that Silicon Valley won't be a blank spot for the tenant-rep alliance for long, even though its longtime affiliate, Cresa San Jose and Cresa Palo Alto, sold to Savills Studley this week.

"It's a dot on the map we'll be missing temporarily, but I'm sure we'll have it filled in the next six months," Rhodes told me.

On Wednesday, I wrote about Savills Studley acquiring Cooper Brady Partners, one of the original Cresa affiliates and a high-profile loss for Cresa, which had nearly 60 U.S. offices and another 60 around the globe. But in a phone call, Rhodes stressed Cresa's recent growth - it just announced a new affiliate in Argentina - and called the Silicon Valley news an "opportunity."

Cresa executives are already talking to possible partners in Silicon Valley, which is a crucial market given the high density of Fortune 500 corporations and fast-growing startups, Rhodes said. He declined to say any more than that about the discussions.

"I like the idea of fresh blood in that market," he said.

Yet the Silicon Valley offices are not the only loss for Cresa of late. The network's Portland office late last year sold to JLL. One could make the argument that the transactions show a downside for the Cresa model, in which offices are independently owned but part of the larger network and brand.

"While they have this affiliation, it doesn't change the fact that every office is doing its own thing and making their own decisions," said Jason Hughes, president and CEO of tenant-rep firm Hughes Marino, which is based in San Diego but making a play to expand in the Bay Area.

In a hot market, where well-capitalized firms are paying big bucks for strong brokerage offices, it makes sense that owners would want to sell.

"We're on the upswing, and these owners can get more than they could a couple years ago,"Marino said. "They're looking to make a buck, and in this business timing is everything."

Still, Rhodes said Cresa is firing on all cylinders. He said Cresa earned $300 million in gross revenue in 2014, a 20-percent increase over 2013 and expected to increase that number 20 percent this year even without Cresa San Jose.

"We are kicking ass, frankly," Rhodes said.

Agents are attracted to the Cresa platform and its commitment to the tenant-rep focus, he said, noting recent pickups from CBRE, JLL and Savills Studley. "I don't think we'll have much of a problem finding a team of three or five or 10 people who say, I want to be a part of this platform."

Rhodes also took a shot across the bow at Savills Studley's commitment to the tenant-rep-only model, saying Cresa is the "last remaining tenant-only platform in the country" and that he doubted assurances from Savills Studley that it would remain focused on occupiers long term. (Overseas, Savills represents landlords.) He said that could help attract tenant-rep brokers to any revived Cresa office in Silicon Valley.

Marino concurred, and said he also looks at the acquisition as a chance to recruit. (Former Cresa San Jose managing director John Brady told me the decision to sell to Savills Studley came only after he was assured the tenant-only tradition would live on.)

Regardless of how everything shakes out, the next few months should be interesting to watch. DTZ is reportedly trying to acquire Cushman & Wakefield in a $2 billion deal. Colliers is spinning off from its Canadian parent company. And smaller players such as Kidder Mathews, Lee & Associates, Transwestern and Avison Young are looking to make inroads amid the changing landscape.

Regarding the Cooper Brady sale, Rhodes said he wished the former Cresa members well: "I have nothing bad to say about them," he said. "Do I wish they stayed or didn't? That's not for me to say. I just embrace change. I know people will want our platform."

For the full story, go to Silicon Valley Business Journal.

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