When CBRE recently hired Paul Lundstedt to be its executive vice president, capital markets, it was a coup for the firm, according to Chris Connelly, CBRE’s executive managing director, particularly because there is a dearth of talent in the suburban office market.
Connelly recently spoke with IREJ about the impact Lundstedt’s hiring will have on the firm and how the company plans to approach a challenging office investment environment in 2012.
Q. What is CBRE doing to improve its office investment business?
The first thing we’re doing is recruiting and obviously Paul is representative of that. We’ve fallen off for a number of reasons over the last few years in the office business, particularly in the suburbs. It’s something we’ve been very focused on. The talent is not super deep, so it’s hard to find a lot of quality folks. It’s kind of a different business. You’ve got a few top-tier people. It’s not that there are bad people, there just aren’t many people in that business. We were chasing Paul for quite some time, and he’s going to fill a huge void for us out in the suburbs, and ultimately he’ll work on downtown as well and we’ll grow both of those businesses going forward under his leadership.
Q. Why is the office investment business so challenging right now?
Over the last three years, we’ve had some personnel changes here and we haven’t been able to find the exact right fit. Paul obviously solved that immediately. We just haven’t had the right folks in the space, particularly out in the suburbs. In terms of the market, if you’ve got really good core product, it can trade, but if there are any issues with the asset in terms of vacancy, etc., it’s difficult. It’s such a challenging environment particularly in suburban Chicago. This a completely different buyer mix that’s starting to emerge in the suburbs, and Paul is way out in front of that trend, which is great. He’s got great relationships with all of these new players. Making an investor comfortable with the story in Chicago is challenging, but if you understand the story, there is one to be had, and Paul is just great at telling it.
Q. What other markets or submarkets does the firm plan on focusing?
In Chicago, it’s suburban and downtown, and Paul is going to be spanning both of those markets. He also had the practice that extends outside of Chicago into some of the other Midwest markets, so we’ll be doing business in places like St. Louis, Detroit, Kansas City, etc. Paul had developed more of a regional practice in the last few years, so he’s going to focus on that as well.
Q. What have been some of CBRE’s most recent successes?
The most recent success we had actually is downtown. We had sold 250 S. Wacker, which was a great story, and that just closed before the end of the year. And in the first quarter, Paul is going to be coming out with a few packages out in the suburbs. So we’re looking forward to transacting those assets as well.
Q. What do you foresee for the Chicago market in 2012?
I think you’ll see that core product that comes to the marketplace will trade. There are a few buildings that have come out in the suburbs here in the first quarter, and there are a few more coming out. I think the investment community will watch what happens with those trades and what kind of appetite they garner, and then I think you’ll see a reaction accordingly. We’re going to watch that pretty closely. In downtown, I think there is a really good story developing in terms of low vacancies in that class A market and I think that will attract some attention from institutional investors downtown in 2012. I think it’s a pretty positive story that’s shaping. There’s still some uncertainty, but if you’ve got a good core of assets, there’s a good story to tell.