Property Broker Is Slashing 160 Jobs

CB Richard Ellis Services Inc., the largest U.S. commercial property broker, is cutting 160 jobs and reducing bonuses to senior management as part of a plan to save money as leasing activity and property sales slow.

The measures will help the El Segundo-based company save $35 million to $40 million over the rest of the year, said spokesman Joseph Fitzpatrick. The job cuts amount to about 1.6% of the company’s work force of 10,000.

U.S. property brokers’ earnings have been declining as a slowing economy keeps companies from expanding as fast as in past years and diminishes investors’ appetite for real estate. A recent CB Richard Ellis study found about 11 million square feet of space was vacated in the first quarter of the year, the largest amount since it began tracking such data in 1988.

“Our business was adversely affected by a slowdown in the U.S. economy in general,” Chief Executive Ray Wirta said in a statement. The slower economy has “led to deteriorating commercial real estate market conditions.”

CB Richard Ellis said earnings also are being hurt by lower-than-expected revenue in Europe and Asia. The company also said preliminary earnings results for April were “considerably below” those for March and the same month a year earlier.

CB Richard Ellis shares fell 40 cents to $14.50 on the New York Stock Exchange. The company is in the midst of being taken over for about $750 million, or $16 a share, by a group of senior managers and investors.

Earlier this month, CB Richard Ellis’ forecasting unit said the U.S. office vacancy rate rose to 9.5% in the first quarter, its highest point since 1999, and could climb as high as 11% by year’s end. A rival of CB Richard Ellis, Grubb & Ellis Co., said commercial property sales fell 9% in the first quarter.

In 2000, the company’s expenses totaled $356.6 million.

“The bulk of the savings will come from a hiring freeze on positions that are currently vacant or have been budgeted for the year and are vacant,” Fitzpatrick said. About half the job cuts will come in North America, he said.

The job cuts and a hiring freeze are expected to save $8 million to $10 million for the rest of 2001, CB Richard Ellis said. Streamlining back-office operations, cuts in discretionary spending and a cut in senior management bonuses will save an additional $27 million to $30 million.