Mosler: RE giants gearing up to take over the world.

On the eve of his firm's acquisition of Canadian commercial real estate powerhouse, Royal LaPage, Cushman & Wakefield CEO Bruce Mosler predicated a rash of similar mergers and acquisitions as the industry takes its seat at the global table.

No sooner had he made the comment, both Newmark and Jones Lang LaSalle announced partnerships with firms that would strengthen their current positions among the world's leading players.

Speaking at the monthly luncheon of the Association of Real Estate Women on September 27, Mosler told the packed Club 101, "We are in for significant consolidation in the brokerage industry. There's so much capital available and so many regional businesses that want to be part of the global platform, it's inevitable"

Giving the AREW members their own exclusive, he revealed ahead of the next day's headlines that he was en route to Canada immediately following the luncheon to announce C&W's acquisition of its longtime affiliate, Royal LaPage.

"It's a very strategic move for Cushman and Wakefield," he told the AREW members. "We are not believers of getting bigger for bigger's sake, but this makes us the dominant player in North America. It puts us further towards our objective of creating the 50/50 in revenue diversification which is critical to Cushman & Wakefield's future."

As the industry enters this major consolidation phase, Mosler said his firm was committed to growing strategically where there are clear voids in the business.

While he said it was unlikely Cushman & Wakefield would be involved in a significant domestic acquisition any time soon, Mosler predicted that real estate's "big three or four" would become "two or three" as soon as the first quarter of 2006 as the pace of M&As quickens and the major firms go all out for global dominance.

"What happened in accounting--it's just a matter of time before it happens in real estate," he said.

According to Mosler, it's the global capital markets that have driven the industry to its present giddy heights. To date this year, some $159 billion has been invested in the US market, a figure that will obliterate previous records and solidify real estate's role as the preferred asset class. It is also part of the reason the US, and particularly New York, continues to see cap rate compression, making it all the more attractive to foreign investors.

Four years after the 9/11 terrorist attacks, Mosler said New York continues to rank among the most invested in markets in the world--Manhattan Central Business District attracted $15.1 billion last year--a significant vote of confidence in the city and a harbinger of a continued reduction in cap rates which, along with the relatively inexpensive cost of borrowing, will keep investors coming "at least through 2006 and probably beyond."

"Capital is seeking a home in real estate--there are few alternatives--and there is a dearth of quality product available," Mosler said.

One such quality product is 200 Park Avenue, which Cushman & Wakefield took great pride in being able to turn into the largest single as set sale of 2005 when the firm sold the building for MetLife to Tishman Speyer for a staggering $1.72 billion.

The city's current residential conversion frenzy is also good, not only for the investment sales market, but for downtown's health in particular, according to Mosler, who pointed out, "With 7 WTC and the Freedom Tower going up, we need to shrink that [commercial] market to accommodate that new product."

However, at some point, there has to be a re-connect with the city's leasing market, he said.

"With so much capital continuing to swarm around the investment sales market, there has to be a continuation back to the leasing market. Manhattan still has positive absorption, but there is slower growth. Traditionally, 40% of take up is financial services and we need that sector to be vibrant and healthy. I think that will happen in the third or fourth quarter.

"But the market is close to equilibrium and what has kept it healthy has been a determined decision to keep spec development out of the market. There is not an appetite for spec development."

Giving a hint of some major leasing deals in the pipeline, Mosler said he anticipated the year would end on a leasing high of 22-24 million s/f--slightly down from last year's 30 million s/f, which was generally acknowledged as something of an anomaly, but still a figure within the realm of possibility this year.

Mosler added, "We may catch up in the third or fourth quarter--investment banks have made a commitment to grow. Citigroup is adding jobs. We'll have to wait and watch."

While job growth and the nation's vulnerability to natural disasters, such as Hurricanes Katrina and Rita, are something from which to be wary, Mosler predicted that a "middle of the road" attitude would keep the market vibrant. "The good news is, despite the challenges, the fundamentals are sound and that should sustain us. I don't think the bubble will burst in the immediate future."