Equity Office says bigger is better for real estate

For Equity Office Properties size matters

The biggest U.S. Office building owner has its fingers in many markets and is looking to expand in its top markets.

Chicago-based Equity Office, which was the first real estate investment trust named to the Standard & PoorÂ's 500 index, is making its debut on the Fortune 500 list at spot 491 this year.

'One of the advantages we have is weÂ're the only national office company,' Chief Executive Tim Callahan told Reuters in an interview. 'WeÂ're really the local player-- in many cases the lead local player in our top 10 markets.'

The company has properties in about 3 dozen cities stretching from New York to San Francisco, which both dilutes vulnerability to bad conditions in certain markets while also leaving it subject to the condition of all of them.

The future of office real estate, however, is consolidation, according to Equity Office Chairman Sam Zell. He sees REITs in the future getting bigger, with a few major players dominating the market.

'YouÂ're seeing the oligopolization of the industry,' Zell said. 'Overall the industry is benefiting.'

He said the REIT industry is suited for oligopolies because of its 'huge capital requirements.'

Equity Office has expanded rapidly in the last few years. It expanded on the West Coast with the purchase of Spieker Properties last July just as the market was cooling from record levels reached in 2000.

(source: Reuters)

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