Increasing The Market
CB Richard Ellis's Retail Services practice is on a mission to double its size over the next few years.
Interviews by Randall Shearin

CB Richard Ellis has more than doubled its size over the past 3 years. With its merger with Insignia in 2004, the company gained a lot of ground. One of the benefits of that acquisition was an increased presence in urban retail markets, and New York City in particular. This key development served to further augment CBRE's Retail Services platform.

Led by Marianne Waggoner as president, CBRE Retail Services is the largest retail practice of its kind in the world. Scott Kaplan and Todd Caruso, members of the Retail Services management team, are part of this group's success. Chosen to head the Western and Eastern divisions of CBRE Retail Property Services respectively, Kaplan and Caruso focus their efforts on the ownership side of the business. The company intends to concentrate equally on the retailer side of the business, as well as continue to grow their investment sale practice. Having dedicated retail leadership is one way that CBRE will differentiate itself to its clients.

Shopping Center Business recently interviewed Scott Kaplan and Todd Caruso about CBRE's retail program, and its structure.

SCB: How has CBRE's Retail Services division been structured?

Scott Kaplan

SCB: What is most of your time spent doing?

Caruso: Scott and I spend most of our time building our retail property portfolio; providing integrated leasing, management and capital market services to our clients. For the fourth year running, we were Number 1 amongst our competitors as it relates to square footage added. In 2004, we added 22.8 million square feet of retail space under leasing and management.

SCB: Is that one of your biggest charges; to increase the leasing and management portfolio?

Todd Caruso

SCB: Do you see a trend in owners outsourcing management in leasing, or is it more common among limited liability corporations (LLCs) and smaller owners?

Caruso: We continue to do a lot of work for institutional and private clients, and continue to experience growth in the Public sector and new areas, like tenant-in-common (TIC) ownership structures. Obviously many of the REITs are fully integrated and have their own leasing and management, and although we're very active with them on the investment property side, our leasing/management activities have been limited. We see this changing over time, as we occasionally are asked to provide leasing and management services in markets where they don't have coverage.

SCB: CB Richard Ellis is such a powerful name in retail. How do you think the name lends credibility to a project when it is announced that you will handle leasing and management?

Caruso: We are a very resource rich environment and that assists our sales professionals in providing interpretation of timely information to help our clients. The breadth of our services is tremendous and we have a strong geographic distribution of sales professionals. We are known as a full-service company that's capable of   providing retailer and ownership services. Market-by-market, we have strengths. In Chicago alone, for example, we represent more than 45 retailers and have 9 million square feet under leasing and management. We are also very strong   on the retail capital markets side.

Kaplan: One advantage we are developing is a retail development resource library for our professionals. By organizing a central repository, our professionals will have immediate access to the items they deem as “most important,” and allow them to be better equipped to handle the fire drills encountered on a daily basis. Presentation templates, comps, sales per square foot of various retail product types and marketing information are just a few of the items that will be included. Our professionals work at a really fast pace, so what's relevant to them today may be irrelevant to them tomorrow. The leadership team often gets asked   questions like, ‘Who has experience with joint venture agreements? Who understands ground leases?' This resource library will be one way for our group to ‘shrink the world' and allow our professionals to learn from one another, share their knowledge.

SCB: Which U.S. markets are you seeing the most activity in right now?

Caruso: New Jersey has become very active from an owner standpoint and a retailer standpoint. Atlanta continues to be the fastest growing major metropolitan area in the U.S. There is a huge retail base there for the population; there is a lot of product and it continues to be very vibrant. Southeast Florida and Jacksonville are two other active areas for us right now. Chicago continues to be stable and new tenants are moving in. Washington, D.C. is also booming right now.

Kaplan: In the west, retail is driven exclusively by rooftops. Phoenix, the Inland Empire, Las Vegas, Sacramento, San Francisco, Seattle and Texas are hot. We have tried to focus our development business in the top 15 residential growth markets in the U.S. With the explosive growth in the housing market across the U.S., we want to do a great job with our developer clients. We want to meet their needs to develop the very best retail projects that they can be proud of in the quickest amount of time. They have some pretty ambitious goals. Our commitment to them is to provide best of class and consistent service throughout the network.

SCB: On the landlord representation side of your business, are you getting assignments on one property type over another?

Caruso: We are working approximately 25 to 30 new properties that have some sort of lifestyle component to them. Many of those properties also have a mixed-use component. That's where the market is going and it is reflective in our portfolio. The neighborhood and community shopping centers still make up the bulk of our portfolio, but there is so much of the lifestyle format that is being introduced into the market, we are going to find more and more orientation in that direction.

SCB: What types of tenants are you seeing coming on strong?

Caruso: The apparel users have been more active over the past year and a half. We are also active with specialty food retailers. Some of the higher end restaurant clients have been opening locations as well. The financial services category is off the charts. We have probably seen that category plateau.

Kaplan: We're currently in the early stages of organizing our Retailer Services Group, which, once in place, will be in direct alignment with the organization of our retailer clients. Take Target for example. If Target has 12 people covering the U.S. for them with regard to real estate, then we think we should have 12 people to cover those same markets. If Target is in Southern California, the company's person there gets to pick his brokerage team. Generally speaking, the selection of a service provider is a local decision, and as a company, we are committed to having the best choice in each market to align with the retailer. The efforts of CBRE's Retailer Services Group will be directed by a dedicated business developer, along with the assistance of seven sales professionals, acting as regional directors, who will be charged with facilitating the activities of their local region. We understand that our capabilities may vary from market-to-market, but under the guidance of regional leaders, we will have accountability. Each assignment pitched on a local basis will be developed with the assistance of the regional director. The director, in turn, will determine the best plan for the retailer by incorporating local brokerage support. We feel strongly that this approach and platform will be a consistent vehicle for our retailer clients from market-to-market.

SCB: What will continue to drive the company's retail services division?

Caruso: We have a great leader in Marianne Waggoner. When Marianne took the helm of Retail Services in 1998, CBRE's retail specialty was severely fractured and without direction. Since that time, the Retail Services platform has grown to what it is today – virtually unbeatable in the industry. Marianne was responsible for the introduction of several new retail initiatives over the years. Initiatives that have enhanced our ability to provide a higher level of service to our clients, furthering strengthening our brand and value proposition. Through her hands on leadership style with our professionals and senior leaders alike, she has succeeded in fostering tremendous support of Retail Services throughout the organization. It's this type of invaluable support that Retail Services will need to achieve our future goals. We are committed to doubling the size of our retail practice, with a revenue objective of $250 million within 5 years. The ground has been laid for us to capitalize on what continues to be a vibrant market.

Kaplan: If we were doctors, we wouldn't be general practitioners; we would be specialists. We don't try to be everything to everybody. CBRE has a stated an overall corporate goal to go from $2.5 billion to $5 billion in revenue over the next 5 years. In order to do that, we can't do things the same way. We have to change some of the ways in which we do business, and specializing is one of those changes. We want to go an inch wide and a mile deep, not a mile wide and an inch deep. We also will have to make some strategic acquisitions in some of the markets where we currently lack depth. Organic growth of existing talent will also be key to our success.

SCB: The growth goal seems very ambitious.

Kaplan: It is ambitious, but if you look at where we were as a company 5 years ago, we were less than a billion. Today, we are a $2.5 billion company. While we are all working hard to reach our new ambitious goal, we know it can be achieved. We've already doubled the size of the company once, so we know we can do it again. At the end of the day, it's all about execution.