Changing times: National firm enters market; Sierra Commercial ends 11-year run

focus-changing-timesColorado Springs-based Sierra Commercial Real Estate closed its doors this week after more than a decade serving the Pikes Peak region.

Owner and President Dave Delich made the call after losing several of his brokers to nationally affiliated firms, but Delich said that parent company Sierra Properties will remain in business.

“The brokerage was just one arm of the business,” he said. “The core business is still property management, construction management and asset management. We’ve been in business for just under 30 years. It is very healthy and very strong and will continue to prosper in this community.”

The chain reaction began in March, when three of Sierra’s key players were recruited to open a Colorado Springs office for national real estate company Newmark Grubb Knight Frank. The New York-based firm opened its temporary space March 1 at 102 S. Tejon St., just two floors above Sierra Commercial’s former home.

Delich said that although he’s been fighting for years to keep his brokers from being lured away by better offers, this decision was only realized in recent weeks.

“There have always been people trying to get involved and take my brokers,” he said. “We’ve had many come and many go. … It just didn’t make sense for me to keep managing a small shop myself.”

Let them disperse

The evacuation began when office experts Kent Mau, Brian Wagner and Mark O’Donnell left the firm last month to open Newmark’s Colorado Springs office.

“I left Sierra because of what I saw as a really good opportunity to expand what I can offer my clients,” Wagner said. “Newmark is committed to growing in Colorado and the western United States — we’ve got a good company behind us.”

Newmark’s ninth-floor space at the Alamo Corporate Center is fairly sparse, with room enough for the small staff: Mau as executive managing director; Wagner as managing director; O’Donnell as director; Mau’s assistant, Abbey Langford; and former Sierra staffer Melissa Edwards, who is working as a receptionist.

“Newmark Grubb Knight Frank is always seeking out good, strong markets,” said Kevin McCabe, executive vice president/regional managing director for Newmark’s Colorado operations.

“When we had the ability to expand into Colorado Springs with a market leader like Kent Mau, it was too good to pass up. … And it made just great sense to bring all three of them over all at once.”

Wagner said the team will remain in the space through August. By that point, the firm plans to have hired three to five additional brokers and found a permanent office in downtown Colorado Springs. Although the current staff is composed of only office experts, McCabe said the firm is actively looking to develop its industrial and retail departments as well.

“We want to have top-of-the-market brokers where we can service our clients very well,” McCabe said. “We go into markets to grow and attract the best talent we can.”

After those first departures, the rest of the Sierra Commercial team moved on to different employers as well.

In mid-March, Colorado Springs Commercial (locally owned affiliate of national firm Cushman & Wakefield) hired retail expert Mark Useman as executive managing director and industrial experts David Bacon and Aaron Horn as senior managing director and managing director, respectively.

The Colorado Springs branch of national firm CBRE Group hired Randal Miller and Nicola Myers-Murty as vice presidents of brokerage services.

Niki Wilson, another former executive assistant at Sierra, is now filling a similar seat at Colorado Springs Commercial.

Delich said that Dale Wheeler, managing director of Sierra Commercial’s land and advisory services division, is in the process of retiring.

David Price, former broker associate for the firm’s retail group, could not be reached for comment.

Former Sierra marketing research director Ben Lowe has joined Land Title Guarantee Co., while brokerage services director Amy Gehrett plans to pursue a career in property and casualty insurance.

Catherine Mosco and Wendy Wolfswinkel will remain with Sierra Properties, according to Delich.

“All the staff ended up on their feet,” Delich said. “It wasn’t that painful of an experience. There wasn’t a single broker that didn’t have an option to go somewhere else.”

New dog in town

Plans to expand into the Colorado Springs market developed as Newmark acquired longtime Denver real estate firm Frederick Ross Company.

McCabe said that thanks to the New York-based company’s wealth of resources, that network can finally begin to physically grow into southern Colorado’s rebounding commercial market.

“The Denver commercial real estate market is firing on all cylinders, and with the Colorado Springs market continuing to rebound, this is an opportune time to extend our focus to that marketplace,” McCabe said in a March 12 news release. “Increasing our commitment and presence are large priorities, and as experienced professionals in the southern Colorado market, Kent [Mau], Brian [Wagner] and Mark [O’Donnell] are ideally suited to lead this expansion.”

Mau and Wagner said that due to Sierra’s closure, as well as their designations as independent contractors, it was easy to transition all of their clients from one firm to the other. Among the group’s clients are Kinder Morgan, Children’s Hospital Colorado, USA Triathlon, Nor’wood Development Group, Brookwood Financial Partners and DPC Development Co.

“For those of us who went to Newmark, it is turning out to be quite a positive experience,” Mau said, “I think the company is very strong.”

Competition on upswing

Both Mau and Delich — viewing the matter from different perspectives — expect national competition to increase in Colorado Springs and the regional market throughout the years to come.

“I think that as time goes on, we will see national companies expanding more and more down here,” Mau said, describing 2014 as a breakout year. “Colorado Springs is an area that gets quite a bit of attention in commercial real estate.”

But despite the invaluable resources and ubiquitous presence these national firms can offer, Delich said the continued existence of local and regional brokerages is vital for a varied marketplace.

“They’re going to continue to get stronger and stronger, and the [local firms] will have to find new, creative ways to compete,” Delich said. “But I don’t think every shoe fits everybody. What we’re seeing is a seismic shift in the brokerage system here in town. The dynamic here has changed.”

But despite the big dog’s lack of mercy toward Sierra Commercial, competitor Tim Leigh said that he has no reason to fear for his own firm.

Leigh, who has co-owned and operated commercial real estate firm Hoff & Leigh for 30 years, said that he doubts the roots of these major firms will interfere with or have a discernible effect on his portion of the market.

That is where the Pareto principle (also known as the 80-20 rule) comes into play, according to Leigh. He said these nationally affiliated firms specialize in the one-fifth of the market that carries around 80 percent of the value — primarily Class A space — while firms like Hoff & Leigh deal in everything else.

According to NGKF numbers, Colorado Springs’ office market totals around 27.8 million square feet, which includes some 8 million square feet of Class A space, as well as an overall vacancy rate of 14.6 percent — down 2 percent since the same time last year. The company expects vacancy rates to return to pre-recession lows during 2014.

Leigh said it is unlikely that these national firms would show any interest in his 80 percent because of the small profit margin. He added that although the national firms sometimes get involved in the depths of recession, they often “hop out” as markets improve.

“Hoff and Leigh has since 1983 operated in the bottom 80 percent, where all the locals are,” he said. “Sierra was one of those companies that went after those national accounts. … The brokers decided they needed to affiliate with a national presence to get that referral business.”

Leigh also said many of Sierra Commercial’s clients were corporate entities, which often see benefits in dealing with a firm with a national presence and the resources that come with it.

But aside from competition between national affiliates like CBRE, Cushman & Wakefield and NGKF, Leigh sees little change in the work of smaller, local players.

“The market is not deep enough for several firms,” Leigh said. “I don’t think Newmark Knight is an indication of any change in the market. … I don’t think that will bring any more national brokerages to Colorado Springs. I think that what we’ve got is what we’ve got.”

Sierra’s future

Despite offers to potentially revive the business’ brokerage arm, Delich said he has committed his focus entirely to Sierra Properties itself.

“I’ve got plenty to do,” he said. “We will continue to work, grow and expand …”

In the future, he said, circumstances may change and he will continue to talk with both local and national companies about possible partnerships, mergers or usage of the Sierra Commercial name. But he’s not too worried about it.

Delich explained that he didn’t start offering brokerage services out of passion, but what he saw as an additional asset to the company.

And more than a decade later, he seems proud that the subsidiary lasted as long as it did.

Delich said nothing will change at the company’s primary office, which has been there since 1986.

Sierra Commercial, a subsidiary of Sierra Properties, was formed in 2003 as the result of a merger between Delich and members of former local brokerage Palmer McAllister.