Competition keeps property managers' profits thin; but Charles Dunn still No. 1 despite smaller portfolio.

The near-standstill in the local real estate development industry has helped make the property management field here about as competitive as it's ever been.

So while most firms on this week's List of L.A. County's 25 largest property management firms posted modest portfolio gains over the last year, competition is keeping their profit margins "very thin," said Dave Mgrublian, a partner in Investment Development Services Inc.

IDS, which debuts on The List this year at No. 17, was among the handful of firms that increased their local property management contracts by 2.5 million square feet or more over the last 12 months. IDS in fact added about 3 million feet of contracts to finish the year with about 5.6 million square feet under management in L.A. County, then recently secured a new contract to handle another 1.1 million feet of industrial space.

But growth alone doesn't guarantee profitability under today's market environment, Mgrublian explained. With little development under way and idled builders targeting management specialists' traditional turf -- contracts with "third-party" owners -- the heated competition is driving fees down, he elaborated.

"We run into five or six worthy competitors on every major deal we go after," Mgrublian lamented.

Now that several firms tied to development activities are aggressively expanding their third-party management operations, economic Darwinism prevails, added Randy Noblitt, the new Southern California director of management services for Cushman & Wakefield of California.

C&W added about 2.5 million square feet of management contracts and moved up three slots on The List to No. 5 with a total L.A. County portfolio of 10.2 million feet.

"With fees this low, there's bound to be some casualties," Noblitt predicted. "Some players just won't be able to provide competitive service efficiently and won't be able to make any money."

The most visible casualty on the local property management scene during the last year was Tishman West Cos., which dropped from No. 3 to No. 24 as the losses of downtown's Security Pacific Plaza and Arco Plaza helped downsize its local portfolio from 12.5 million feet to 4.6 million.

Tishman West wasn't alone. Sovereign/Ring Management fell 12 slots to No. 22 during the last year, losing more than 1 million feet of residential contracts and 1.5 million in commercial property management assignments.

Charles Dunn Co. retained its No. 1 slot even though its portfolio contracted slightly to 20.6 million feet under management -- mostly through the loss of residential assignments.

Trammell Crow Co. likewise maintains its No. 2 position despite a slight drop in management contracts from 18.9 million to 18.2 million square feet. The developer-turned-service-provider's Southern California management portfolio actually expanded from 21 million to about 26 million feet, explained managing director Mike Elizondo.

But in the county, the firm sold several properties "on behalf of our joint venture partners and third parties" over the last 12 months, Elizondo continued. "And the new owners frequently take management in-house and it costs us."

A trio of players joined C&W and IDS in the "big gainer" category. Prudential Realty Group's Premisys Real Estate Services jumped from No. 16 all the way to No. 8, adding about 3 million feet of commercial management contracts to offset the loss of 450,000 in residential assignments.

R&B Realty Group also had a strong year, expanding its portfolio by 3 million feet to 11.6 million, due primarily to new residential contracts. It moved up The List from No. 6 to No. 4.

And JMB Property Management added about 2 million feet of contracts and moved up one notch to replace Tishman West at No. 3.