CB Richard Ellis Starts Office Products Venture
CB Richard Ellis Services Inc., one of the world’s largest real estate services companies, is starting a business that offers its clients discounts on everything from office furniture to computers.
The move is an attempt by the Los Angeles-based company to capture a bigger market share amid a wave of consolidation in the property brokerage and management industry.
CB Richard Ellis has formed alliances with more than 20 major companies, including Staples Inc., Dell Computer Corp. and Xerox Corp., to negotiate purchase agreements that provide one-stop shopping for its 35,000 tenants and their 1.2 million employees seeking to cut costs on office-related products and services.
CB Richard Ellis, which manages 425 million square feet of space, has used economies of scale to negotiate cut-rate prices on a range of services such as long-distance calling, bottled water and fax machines. For example, the company offers tenants and their employees discounts of as much as 50% on office supplies from Staples and express mail services from United Parcel Service of America Inc.
Other real estate service companies, such as Cushman & Wakefield Inc. and Trammell Crow Co., provide such services on a more limited basis to single-tenant buildings or building owners.
The new service is being rolled out to tenants across the country, after having been tested in markets on the West Coast.
CB Richard Ellis, which has more than $1 billion in annual revenue, expects the venture to shave up to $5 million off its expenses next year. The new division could generate $15 million in revenue annually if as little as 10% of the company’s tenant base orders just office supplies, said Craig Stevens, senior vice president in charge of the new business, Service Direct Advantage.
The company is developing an online ordering system that will directly link its tenants with vendor partners.
Like other real estate services companies, CB Richard Ellis has watched its stock price plunge on concerns that a slowdown in property acquisitions will eat into its earnings.
Its shares, which fell 25 cents to close at $17.56 on the New York Stock Exchange, are down more than 45% this year.
