Coldwell to Reenter Commercial Business
Reflecting the revival in the commercial real estate market, residential brokerage giant Coldwell Banker Corp. said Wednesday that it will reenter the commercial business this spring.
The Mission Viejo-based company plans to sell 150 commercial franchises nationwide over the next five years. Coldwell Banker, which owns 300 residential real estate offices and franchises more than 2,100 brokers, said it will not own any commercial offices, instead focusing on using its expertise as a franchiser.
For most of its 90-year history, Coldwell Banker offered both commercial and residential real estate services. But in 1989, its then-owner, Sears, Roebuck & Co., sold the commercial side to employees and investors, who now operate the business as CB Commercial Real Estate Group. As part of that deal, Coldwell Banker agreed not to provide commercial services for five years.
Chandler Barton, Coldwell Banker’s president and chief executive, said a principal factor behind the move is the improving commercial real estate market.
“We think the timing is right for this,” he said. Even so, Coldwell Banker, which is now owned by the Fremont Group of San Francisco and had a 10% increase in sales last year, will be stepping gingerly back into the market.
Barton declined to say how much Coldwell Banker is investing in its new unit, Coldwell Banker Commercial Affiliates Inc. So far, the company has hired consultants and five commercial real estate specialists in Mission Viejo to launch the business.
This year, Barton said, the company plans to offer 25 commercial franchises to existing independent brokerages in several states, including California. Commercial franchise fees would be 3% of revenue--about half of that charged to residential franchisees. In exchange, Coldwell Banker would provide its well-known name, referrals, training and access to its national database.
Coldwell Banker’s reentry comes as the commercial market nationally is showing signs of life. Last year, for the first time in quite a while, many parts of the country reported lower vacancies and growing rents, and analysts generally see continued improvement ahead in the commercial market.
In California, the commercial recovery has been uneven. Grubb & Ellis, a large commercial real estate firm, said in a report Wednesday that Southern California’s industrial vacancy rate plunged last year to 9.3%, from 12.7% a year earlier. And rents for industrial space rose an average of 9% across the region.
Office vacancies, meanwhile, dropped last year to single digit percentages or just above in parts of the San Fernando Valley and Orange County. In some parts of downtown Los Angeles, though, the office vacancy rate stood at more than 30%.
Industry executives were not surprised by Coldwell Banker’s move, particularly given its history and the expiration of the five-year noncompete agreement.
“With the commercial market beginning to come back, there may be room” for another player, said Clark Booth, an executive vice president at CB Commercial in Newport Beach.
Booth said the Coldwell Banker name is certainly well-known, but he and others in the industry noted that how well its commercial business fares will depend on the markets it chooses to enter and the quality of its franchisees.
