He helps companies right-size their real estate
Mark Russell, recently appointed vice chairman of New York-based commercial real estate firm Newmark Knight Frank, says the Houston market has plenty of sublease office space that is unscathed by Hurricane Harvey.
His firm, which recently donated $10 million to Hurricane Harvey victims, has been expanding into the state. NKF has hired a team of veteran brokers from tenant representation firm Savills Studley, including Russell and executive managing directors Steve Biegel and Jay Bonano. The trio has handled more than $1.25 billion in deals totaling more than 100 million square feet over the past several decades. They are among 125 NKF employees in Houston, including the national ARA Newmark apartment brokerage firm.
Russell spoke with the Chronicle about his new role.
Q: Why are you moving to NKF? A:
The dynamic growth they’ve been experiencing across the country, you want to be part of that. They’ve gone from a very small shop to a really big player in the marketplace. For us to be invited to be a part of that, particularly as leaders in the company, there’s no way we’re going to pass on that.
Q: How does Houston fit in with NKF nationally? A:
Texas is just too big of a market not to be in. We’ve gone from not many to 125 employees and are planning to go even bigger. We continue growing our investment sales service lines, agency business and debt market business. Those are all really key initiatives. Houston is a big part of it.
Q: What types of work will you do? A:
Because of our backgrounds, we have the ability to do a lot of different things beyond your traditional tenant rep/ user-occupier brokers. We do investment sales, acquisitions, dispositions for companies that are buying other companies. We’re often brought in to advise them on their real estate portfolio. We bring a strong set of tools that enables us to do more than one side, tenant representation.
Q: What are companies doing to get the right real estate footprint? A:
This will be the third meaningful, significant downturn I’ve been in. I’ve seen this show before, albeit different. You’ve got to have seats filled. When you have the situation with the oil and gas and the service providers, the seats are empty. That’s why you’ve got 10 million square feet of sublease space on the market. It’s a huge number. That space has got to get absorbed before the market gets healthy. When that gets done is anybody’s guess. NRG did a deal where they announced they were subleasing over 400,000 square feet of space at One Shell Plaza. Those types of things happen. Those are good activity models. That doesn’t help the landlords for which NRG is leaving. Companies are still pretty much hunkering down and keeping their costs down. I don’t see that changing any time soon.
Q: How is Hurricane Harvey impacting real estate? A:
On the short term, you’re seeing the BPs of the world who just got hammered out west and AIG’s building, they’ve got to have some space temporarily. Fortunately for those companies, there’s some good sublease opportunities that can help them. They’ve got some temporary relief before their buildings get up and running. That will all go back to the sublessors six months to a year from now. It’s good for activity, but I don’t know if it moves the needle for the overall market.
Q: How is the market different now than 10 years ago? A:
A tenant might have had one or two options 10 years ago. Today, you can count them on two hands. That creates great leverage and great opportunities. Today, you’re able to get extension options and termination options and large concession packages.
Q: How do companies use space differently today? A:
Some people work at home now. You have hoteling from some companies. You don’t go to the same desk every day. That reduces the number of offices you need. At law firms, you used to have 1,000 square feet per partner. That number is down to 600 to 700 square feet per partner. All the companies have to do that. Aside from HR, the real estate component is their second biggest expense. They’ve got to manage it. That means reducing their space.
Q: What’s your outlook for the future? A:
We’re cautiously optimistic. The big companies can start planning for opportunities for growth. There are some wild cards. The DuPont and Dow merger will have an impact on the real estate. Until the dust settles on acquisitions, those could have a negative impact. It’s a good time to be a tenant and will be for the foreseeable future.