Weak leasing spurs broker shuffle

Real Estate Weekly, July 24, 2002 by Parke Chapman

The pecking order within New York City's real estate brokerages remain in flux. Just last week, Grubb & Ellis' chief operating officer--Mark Costello--left the firm to "pursue other interests," according to a Grubb & Ellis release. It is unclear if Costello was forced out of the firm or resigned on his own. A Grubb & Ellis spokesman denied knowing what prompted the move.

Meanwhile, would-be juggernaut CB Richard Ellis continues to poach talent, hiring away Studley technology chief Jeff Hipschman.

Hipschman headed the firm's technological arm for eight years. In this capacity, he worked with national clients such as Andersen and Microsoft. Two years ago Hipschman was named executive vice president of Julien Studley's corporate headquarters here in New York City.

The CB Richard Ellis news comes as no surprise, given the firm's ambitious expansion plans here in New York City. But Grubb & Ellis' loss of a chief operating officer does not bode well for the firm. Over the past few months, Grubb & Ellis has hemorrhaged high-level brokers, among them Glen Markman who was hired by Cushman & Wakefield.

Barry Barovick, chief executive officer of Grubb & Ellis, will assume Costello's responsibilities in his absence. The announcement comes in the wake of several high-level Grubb & Ellis defections, among them broker Glen Markman who was hired by Cushman & Wakefield. Costello was hired to be the #2 executive last July.

All of this comes only one week after Mary Ann Tighe left Insignia for CB Richard Ellis in the summer's highest-profile staffing coup.

What do these defections say about the market? In this dog-eat-dog business, probably very little. With leasing at a standstill in many parts of the city, however, many brokers are not making money. It's the perfect time for a rival firm to lure away top talent, with demand for signing bonuses at an all-time high. Firms are also gearing up for the market rebound when it happens. Once the market begins to pick up speed, brokers will be so focused on deals that joining another firm won't be that simple. Now, however, it is all about one thing--cash.

Another corrosive effect of this market involves defectors who then raid their former employer's staff. Real Estate Alert reported last month that former Newmark broker Bob Pressman tried to raid the staff there before he left to join Cushman & Wakefield. Pressman was reportedly seeking to bring retail brokers Joanne Podell and Elliot Resnick to Cushman & Wakefield. Pressman, who worked at Newmark for two years, was unsuccessful in his efforts to bring the two brokers with him.

"It's easy to move when you don't have a lot on the table. Brokers working on big deals aren't going to jump to another firm before the deal is done," said Kenneth Patton, associate dean of New York University's influential Real Estate Institute.

Patton referred to this phenomenon as "golden handcuffs," whereby a broker working on, for example, an 800,000-SF lease isn't likely to break from his firm until the lease is signed (and his commission is paid out.)

"The deal, after all, belongs to the firm not the broker. People cannot just leave right in the middle of a deal," said Patton.

Enrollment at the NYU Real Estate Institute is "skyrocketing," according to Patton.

"Downturns do promote enrollment. When the market's quiet, people can appreciate this degree more," said Patton.