The Real Deal New York

While the rest of the economy has flagged and residential real estate has held strong, people from all over have jumped into the profession in Manhattan.

In the last year alone, the number of licensed agents has jumped 15 percent, from 9,880 to 11,744.

The number of licensed real estate brokers climbed 5.4 percent between January 2002 and the end of August.

“We re seeing the most diversified group of people with the most diversified backgrounds coming into the industry today,” said Esther Muller, founder and president of the Academy for Continuing Education, which offers courses in real estate. “Some people now have to wait three weeks just to take the licensing exam.”

“It s still true that people are coming from the Internet and Wall Street,” said Mitchell Lawrence, director for Broker Training and Marketing at Corcoran, which recently expanded its offices and brought in 68 new agents this summer. “But we re seeing a lot of people from law, advertising, entertainment, public relations and everywhere else. It s really running the gamut.” Occasionally some MDs have joined the ranks.

“Some of it was due to the economy,” said Lawrence. “Some people wanted to get out of the rat race. They jumped out of the frying pan and into the fire, but they ll find that out.”

While still coming to real estate as a second, rather than a first career, the new recruits are younger, well educated, and more likely to be male than in the past.

As the rental market lags, some younger brokers are eschewing starting out in rentals, a common practice, and heading right into sales.

“The average age has definitely gone down,” said Lawrence, who said he is noticing a lot more young brokers in the profession. “It s skewing younger.”

Still, real estate is a second career for most. “Young graduates from college generally cannot do it,” said Jacky Teplitsky, a vice president at Corcoran. “It takes six months to earn any money” and recent graduates usually have little savings.

Andrew Heiberger, President of Citi Habitats, said he has seen a greater number of well-educated people coming into the industry.

“One of the things that has happened has been the ability to hire tremendous talent,” he said.

“It s common to hire people with law degrees and PhDs. Bankers are coming in, and CPAs.” Many were prior customers who saw the potential money in real estate. “They wrote checks for $30,000 or $40,000, and they would get to talking with brokers. How much of this do you get to keep? Then they started doing the numbers.”

In a profession where a majority of the practitioners are women, many of the new agents are men.

“In some of my classes, men are the majority now,” said Lawrence. “It s getting to be about half and half. A decade ago, it was maybe even less than one-third men.”

Lawrence said there might be several factors at play in bringing about the change. “You can really make money here,” he said. As more men enter the field, “the perception becomes different. The economy spilled out a lot of guys, too. In real estate, they can start at any time. And they don t have to start in the mailroom.”

Teplitsky said there are more men because a career in real estate is now seen as a primary breadwinner role. “Women traditionally worked in real estate as a part-time job, and somebody else had to bring home the bigger bucks.” Now, the bigger bucks are in real estate.

Younger brokers who traditionally started in rentals, partly because the money is more immediate, are now beginning in sales. “The rental market has not been as great,” said Teplitsky. “Even though you make a sale today and don t close for three months, young agents know there is money to be made there.”

Heiberger, who heads the largest Manhattan rental company, acknowledged the trend. But he also thinks “it cuts both ways,” and that people are still coming in as rental brokers for the immediate income.

The landscape has also changed for broker s assistants, Teplitsky said. Compared to three years ago, when she interviewed to hire for an assistant, “today s candidates are of a much higher educational and socioeconomic level.”

Whether the new influx of talent with outlast the next economic upturn is anybody s guess. “It s a good question,” said Lawrence. Heiberger thinks “it s going to get more challenging to get and keep good talent if the economy picks up.”

One thing that remains constant, however, are the daunting odds facing new agents, regardless of the economic climate. New agents must not only be self-starters, but also be able to go their first six months or a year without a paycheck.

Estimates of the attrition rate vary. “I think we probably keep between 60 and 70 percent,” said Douglas Elliman s director of broker development, Kay Brover. That figure includes people who leave of their own accord and people who are asked to leave because they don t meet certain productivity levels. Heiberger said the attrition rate in the first year “has got to be 50 percent. If you make if through the first year, the attrition probably goes to 25 percent,” he said.

Lawrence said the idea of one in four agents staying in the profession “doesn t seem off the mark.”

Misconceptions about the industry abound on the part of new agents, Muller said. “The one general rule is that most people are under some sort of illusion about the industry,” she said. “Some people only see the dollar sign,” said Teplitsky.

“You have to be on call like a doctor,” said Muller. “You have to be a psychologist. You have to be an entrepreneur, with a close eye for detail. Buying a home is a personal emotional decision, mixed with the financial.”

Neil Binder says that nobody else in Manhattan residential real estate is “dumb enough” to follow what he is doing when it comes to training new brokers.

He is joking, of course. Over the last 20 years, Binder has developed the most extensive training program for residential agents in Manhattan. The principal of Bellmarc says he spends more time on training than on any other portion of his job. He has also written two books on sales.

The training he offers new agents is intense. Agents are required to complete a two-month program during which they can t conduct any business unless they ve already worked in the industry. Students have to memorize every clause in a standard contract, listen to 16 audiotapes, master a 600-page sales manual, read Binder s two books, and complete two 25-page take home exams as well as two closed book tests.

If they make it through the program about one-third drop out they can look forward to another follow-up training program six weeks later.

“It s intended to be daunting,” said Binder, who said he wants to insure agents know what they are the doing from the day they start doing business.

“We want to send out brokers that are cooked from inception,” he said. “We think customers have a right to have agents acquainted with what they are doing.”

While the Bellmarc program tends toward the academic, there is a wide range in the types of training programs offered by residential real estate companies in New York. For many companies, training is best done in the classroom, at least initially. For others, the best way to learn is out in the field, right from the start. More often than not, it s also a matter of company resources.

Much of the basic subject matter is the same new agents learn about co-ops, condos, broker law, and contracts. They learn selling, negotiating and marketing strategies, subjects not dealt with in getting their license. They cover strategies for obtaining listings, how to conduct open houses, prepare board packages, read financial statements, assess the investment value of properties and the like.

One of the big divides is between big companies and small companies. Large companies offer more regularly scheduled, formalized training programs, while smaller companies tend to train new agents one-on-one.

“It basically goes from none to full speed,” said Kay Brover, director of broker development for Douglas Elliman. “That s a problem. Smaller companies don t have the manpower to do programs. Though if you work for a really good owner, you have the benefit of that, and many companies have terrific owners and managers.”

Brover said the monthly program offered by Elliman, which lasts between two and three weeks, is “soup to nuts.” There were more than 40 new agents in September s incoming class. The program takes off where the 45-hour course required for a New York State license leaves off. “It covers marketing, and knowing your product,” said Brover. The bent is practical, with students learning about co-ops, “not so they can pass a test, but so they can qualify a buyer.” Agents learn about financing, the law, industry organizations like the Real Estate Board of New York and other topics. Mortgage brokers, attorneys and other speakers are invited in. Brover said agents generally aren t supposed to work during the course of the program, “but if a second cousin calls and says he wants to spend three million dollars on a new place, I m not going to tell someone to stay in class.” Like at other firms, agents usually are paired up with a mentor as well.

Fox Residential Group, a much smaller firm than Elliman with around 40 brokers, doesn t run any regular training programs and prefers the one-on-one approach, said founder Barbara Fox.

“I ve been through a lot of different routes to train people,” she said. “I think the real training comes by doing.” The company does offer an initial five-hour training session to brokers. After that, brokers learn as they do their first deal with Fox or another senior broker at their side. “Sometimes I ll go out with them,” and if they are not sure about something, “I show the place for them.” After the first deal, agents pretty much know the ropes, she said. “There may be things that come up, but you know the general structure.”

Because the process of training is so time consuming, Fox limits her new hires. She said she hadn t made any new hires for three years until she brought in a class of six new agents last year, making use of extra space she had in her office. It was more efficient to train six new agents at once than train six people one at a time, she said. She also said she is very selective in bringing new people in to start training. “Big companies will hire anyone who walks or talks,” she said. “I want to see how they will get along” with the rest of the company.

Some companies who are considerably larger than Fox Residential, like Stribling & Associates, also like the one-on-one approach, New agents at the 160 broker firm sit beside the supervisor of brokerage in their office for five or six weeks, getting exposure to everything that passes across a supervisor s desk.

Some programs, or training directors, at other companies take different approaches. Corcoran offers a comprehensive, two to three week program similar to Elliman s, and was training 40 new agents last month. In addition to the basics, Mitchell Lawrence, director for Broker Training and Marketing, emphasizes that new agents have to see themselves “as a business,” with the mantra that agents are “now a business that needs to be marketed for success.” The former publicist for Paramount Pictures teaches agents to “differentiate themselves” from the competition. Word-of-mouth and mailings, as well as “outside the box” marketing methods like hosting seminars and writing newsletters are explored, and Lawrence also works with agents to help them “lay a foundation” and develop a structure for their new business. Other firms, like Citi Habitats, also offer unique programs. President Andrew Heiberger said his company is the “only firm with a training program for rentals” in place.

As far as the instruction that agents receive in getting their state licenses, usually before starting with a company, some say they are not overly impressed. “The state training is a little thin,” said Binder. “The state does a mediocre job. It can be improved.”

Esther Muller, founder and president of the Academy for Continuing Education, said the program “is what it is,” though she noted that “it s easier to get a driver s license.”

The 45-hour course required by the state for a license is now shorter than neighboring states. In New Jersey, the licensing course is 75 hours. Connecticut s requirements to obtain a real estate salesperson s license were raised last month for the first time in three decades, with prospective licensees required to sit in on 60 hours of classes, up from 30 hours previously. Across the nation, by contrast, Maine and Vermont don t even make prospective agents take real-estate classes to get an initial license (they only have to pass the test), though some states like Colorado have strict standards.

With the economy in the doldrums, it s no surprise that commercial real estate firms have been receiving a lot of resumes. But with the market for office space tepid, job openings in commercial real estate appear to be relatively scarce.

The development of new office, retail, industrial and multifamily buildings is at its lowest level in a decade nationally. According to the National Association of Realtors, 16.7 percent of all commercial office space across the country is now vacant, as is 12.8 percent of all retail space. The overall office vacancy rate in Manhattan was around 12.4 percent in July, according to Colliers ABR.

At CB Richard Ellis, the company plans to bring in two new hires over the next month and a half for its New York operations. In a year, the company might bring in six to eight people total, said Susy Reingold, Director, Leasing, for CB Richard Ellis. There are many more knocking at her door.

“You ve got an awful lot of graduates looking for jobs,” she said. Overall, candidates trying to break into the field generally fall into three categories: some just out of school, some out for two to four years, and others who might be 10 or 20 years out of college and be working in sales in another industry.

A recent Colliers report said that an increasing number of commercial brokers around 50 percent are likely to have other professional backgrounds before coming to commercial real estate. Reingold said she looks to hire those with New York commercial real estate experience, followed by those with commercial experience in another market, and lastly, those with backgrounds in sales “of some sort or another.”

Once on board, new hires have mentors, non-broker managers, and training sessions one night a week.

At Cushman and Wakefield, resources like the company s emerging brokers group bring in guest speakers and serve as venues for social networking, according to spokesman Dwayne Doherty.

Commercial real estate has traditionally been a Caucasian male-dominated industry, but women have made considerable headway over the years. At Jones Lang La LaSalle, for example, around 31 percent of the company s employees throughout the U.S. are women. “We have a lot more women then we used to in the industry,” said Reingold. In the past, she said, women tended to be last in, and first out during tougher economic times. Now, says Reingold, who herself has been in commercial real estate for the last 32 years, “their staying power is better.”

When Richard McDonough starts on a career, he tends to stick with it.

The 42-year-old Upper West Side resident had spent close to the last two decades of his life working as an operations manager at Bloomberg LP, managing hardware and software installations for the company. But real estate was calling.

“I wanted to find something totally different,” said McDonough, a family man with two young sons who thought about making the career change for more than five years before taking the plunge. He had bought four apartments in the last 12 years and liked the idea of working for himself. “I wanted to set my own schedule.”

After convincing his wife that the family could forgo his paycheck until he made his first deal “I had to set benchmarks” -McDonough started as an agent at Douglas Elliman in August.

The Real Deal plans to tell the story of McDonough and two other new agents as they get their start in the industry over the next several months, following them until they make their first deal.

In a field where at least 50 percent of new agents don t make it, McDonough is confident of his chances.

“I would like to get an exclusive or two in the first six months and produce a positive income,” he said, adding that he is prepared to do whatever it takes to make that happen.

McDonough s path to a career in real estate began in March, when he started classes at the New York Real Estate Institute. Because of his job, the process was slow. “I did it on nights and weekends,” he said, and finished up at the end of June. He said he was “astonished” by the number of people who were also getting their licenses, particularly when he showed up at 6 a.m., three hours early for his licensing exam, and found himself 30th in line. Most of the other people he ran across seemed young, like the group of law school students looking to real estate as a backup profession.

McDonough had become familiar with Douglas Elliman when selling one of his apartments, and when he was offered a job, decided to go with the company because of their training and “because of their name,” he said.

At the time of his interview in late August, only a few weeks into the job and before starting the three-week company training program for new agents, McDonough said he felt like he was back in school.

“You feel like the new kid again,” he said. “You have a lot of questions, but you don t want to be asking questions every five minutes.”

Already, McDonough, who has a mentor and is part of a new brokers group that meets weekly, had two buyers he was beginning to work with, one looking for a place on the Upper West Side, the other in Hamilton Heights. He had begun working on a mailing list of 75 friends and former co-workers at Bloomberg, where his wife still works. During a recent trip to New Jersey, where he grew up, to visit his sister, he said he plastered his name around town on bulletin boards, over the pictures of other agents. “I have no shame,” he joked.

MARGARET MAILE

Margaret Maile (pictured in photo on title page), a new agent at Corcoran, has high hopes for how her academic career and advanced study of decorative arts history might dovetail with a career in real estate. Maile, an Oregon native, moved to New York four years ago when she accepted a scholarship to attend The Bard Graduate Center. Already having completed a master s degree in decorative arts, she started her PhD last year, but has already completed her coursework and has only a thesis to complete.

It was a realization she had while sitting in a particularly dry class last year that led her to start thinking about a career in real estate. “I thought, there has got to be something better than this, ” she said. “Also, you can t make money in decorative arts history, and this is a way to combine the two.”

Outside of academia, Maile has worked as a consultant for Phillips de Pury & Luxembourg Auctioneers, and said she gained a good grounding in marketing as a result. “You bring more value to the object by knowing its historical value,” she said. Down the road, Maile is interested in exploring how it might be possible to promote undervalued architecture (she is a fan of “ugly” 1960s and 1970s buildings like the Maritime Hotel) through articles and books.

But for now, Maile said she must focus on learning the basics. She initially started at a smaller firm but left after two weeks, after meeting a Corcoran broker at an open house who is now serving as a mentor. Maile said she believed Corcoran “had a greater support network,” including training and computer resources.

Working out of Corcoran s offices at Broadway and 81st Street in late August, Maile said she was focused on “learning the vocab and figuring out how the culture works.” She had several buyers, and was learning “they don t all know how to verbalize what they want,” and that it was better to show a buyer four different places than apartments that were all similar. She was getting some leads from an electronic Corcoran bulletin board, and also trying FSBOs, but finding that even with the promising ones “relationships were getting stalled.” Her mentor had also been providing leads.

While Maile waited to land her first exclusive, and eventually, sale, she said she was prepared to go without money for a while. Pulling together scholarship money from school and other sources was a pain. “But I m doing this because I have a long-term goal,” she said.

LESLIE O SHEA

Though she s a new agent, Leslie O Shea has been around real estate all her life. The 36-year-old New York native, who was only two days on the job with Stribling & Associates in mid-September, has connections to the industry in a variety of ways, though she has generally worked in marketing for most of her career. She grew up with an attorney father, who helped put together mall deals in Los Angeles, among other ventures, and a mother who was an architect who designed commercial space. At age 16, O Shea got her first exposure to residential real estate when she worked as an assistant for a broker in Southampton.

Her professional career began as a media planner at Foote, Cone & Belding, followed by five years at The Masters School at Dobbs Ferry, where she raised capital money. But by around 2000, with earnings from the stock market, O Shea was again involved in real estate, buying five acres for development in Maine, and taking classes in real estate finance at New York University. While the project didn t pan out – builders quadrupled prices thanks to a change in the economy “it gave friends a chance to come up and play with the excavator I had,” O Shea said.

Becoming an agent entered the picture after O Shea had restarted a marketing career in New York. A boarding school friend, Anna Hargraves Hall, was deciding on a career change and went to work at Stribling. Hall loved it, and told O Shea that she should follow suit, she said.

“She was after me to join, and I was really knocked out by Ms. Stribling and Betsy Dean [the supervisor of brokerage at Stribling s uptown office],” said O Shea, who said she was attracted by Stribling s “polished image.” As far as becoming a broker, “I m getting a lot of positive feedback,” from all my friends, O Shea said.

O Shea said she thinks Stribling s training a one-on-one approach in which new agents sit beside the supervisor of the brokerage for five or six weeks will help launch her as an agent.

“I have a strong sense of confidence that I can build up a serious business,” said O Shea. “Though I don t have any idea how long it will take.”

It s not just bringing the Olympics to New York in 2012 that has Dan Doctoroff thinking big these days.

With the tepid office leasing market, maybe the last thing some people are thinking about is the desirability of adding new office space. But when you re Deputy Mayor for Economic Development and Rebuilding, that s your job.

In Lower Manhattan, the far West Side, Downtown Brooklyn and Long Island City, as well as in Harlem, Flushing and the Hub area of the Bronx, the city has major plans for economic development.

Some talk about replacing the 10 million square feet lost at the former World Trade Center site in the next few years as more than the market can handle. Doctoroff is thinking more along the lines of an enormous 110 million square feet added throughout the city over the next three decades.

He s also taking part in other massive projects the city s plan to reclaim the waterfront, to add 65,000 units of affordable housing, and to redevelop the far West Side in connection with a 2012 Olympic bid. Doctoroff, a former investment banker, launched the Olympic plan on his own five years ago before being appointed by Mayor Bloomberg.

Because he s drawn to the big and the intractable, he s enjoying his first two years in city government.

“I m usually drawn to situations with hair on them,” said Doctoroff, 44. “And everything has hair on it in city government.”

Private enterprise, at Lehman Brothers and later as the managing partner of Oak Hill Capital Management, provided some preparation. Doctoroff worked on the largest bailout of a thrift ever, for example. He took part in forming one of the largest hotel managers and REITs in Interstate Hotels. Business required him to “look five years into the future, to see what the competitive environment would look like.” In launching his Olympic plan in 1998, he would considerably up the ante.

The city s plans for 110 million square feet of office space over the next three decades are predicated on 400,000 new employees and a conservative growth rate of 2 percent.

Steven Spinola, president of the Real Estate Board of New York, said he “thinks that number is high.” He noted that in decades like the 1960s, between 50 and 60 million square feet were built, while in the 1990s, 8 to 10 million square feet were built.

But without the added space, the city won t maintain its market share of office space in the region, according to Doctoroff. Already, New York has been losing market share for the last 15 years. Space was in short supply as recently as the dot-com boom.

“For us to be competitive in the city, we have to offer what people need,” said Doctoroff.

Downtown, the plan is to create 10 to 12 million square feet of space in the next 10 to 15 years, said Doctoroff. Another priority is to make sure the rebuilding effort creates an active street life on the former World Trade Center site and off the site. “Retail, more than anything else, will determine the nature of the street life,” Doctoroff said. “We need to make it something spectacular.”

In Downtown Brooklyn and Long Island City, officials want to create eight to 10 million square feet of space, largely for back office workers, Doctoroff said. Earlier this year, the city announced it would invest $100 million in Downtown Brooklyn in the next decade.

In Midtown, Doctoroff estimated that only around 20 million more square feet of space could be added in the next 25 years. Taken together, all existing markets would fall short of the 110 million square foot goal.

“We have a big, big gap,” Doctoroff said “The only place that can fill the gap is the far West Side.”

The city s ambitious plan for the far West Side would involve creating 28 million square feet of commercial space and 12 million square feet of residential space over the next 40 years. In time for the 2012 Olympics, if the city lands them (the decision will come in 2005), there would be a new Jets stadium, an expanded Javits Center and a No. 7 subway line that extends to 11th Avenue.

Presentation of the financing of the plan has been delayed because some work is still being done on where to put “noxious” uses like sanitation garages and bus garages, Doctoroff said.

One of the leading contenders to finance the project – payment in lieu of taxes collected from developers planning to build in the area is “unquestionably going to be an important component,” Doctoroff said. (See “Far West Side Story”, also in this issue)

If the city lands the Olympics, it will be a major coup for Doctoroff, who has been nicknamed “the deputy mayor for the Olympics.” Doctoroff claims the idea for the Olympics hit him suddenly while attending a World Cup game in 1996 between Italy and Bulgaria.

Since forming NYC 2012, he has stepped fully into the limelight, and is considered a skillful seller of his vision, which sees the Olympics as a perfect expression of the international microcosm that is New York.

“I believe New York is the best example of what the world should and could be,” Doctoroff said. “Particularly as it globalizes. We ve drawn people from every corner of the globe for 400 years, and crammed them into small places and forced them to get along, and they do, more than any other place in the world.”

He didn t always feel that way about New York. Doctoroff, the son of an appeals court judge and a psychologist, was raised in suburban Michigan and reluctantly followed his wife to New York, where she had landed a job, twenty years ago.

“I had been here three times before and I hated it every time,” Doctoroff said. As a third year transfer to New York University Law School, he had lots of time on his hands to explore the city. But he found it big and intimidating. “Until you find your place in New York at least for me – it can be very bewildering,” he said. “But that s what I ve grown to love about it – the change, dynamism and energy.”

“Daniel is a straight talker,” said Spinola, who supports the Olympic plan. “When he first presented his plan, people might have said he was crazy. Now look where we are.”

Midtown welcomed a decrease in the amount of available office space for the second straight month in August, while Downtown and Midtown South saw an increase in available space amid lackluster leasing, a report by CB Richard Ellis said.

CB Richard Ellis also reported that tenants achieved an average tenant-improvement allowance of $39.02 sf and an average rent abatement of six months in Midtown leasing transactions concluded over the last three months.

The data was part of a new measure of the value of lease concessions, called the Concession Values Index, that will now be published by CBRE on a monthly basis. A Taking Rent Index – which will track the difference between published asking prices for office space and the initial taking rents that tenants actually pay when deals are consummated – was also set to be launched in late September by the company.

In reports from other companies, Colliers ABR saw Midtown class A vacancy levels improve in August, while Downtown and Midtown South fared worse than the month before. Grubb & Ellis, by contrast, noted a slight drop in vacancy in all three office markets.

MIDTOWN

Midtown posted its second consecutive month-to-month decrease in its availability rate from 12.4 percent in July to 12.3 percent in August, only the second monthly decrease since August 2002, CB Richard Ellis reported. The market experienced positive net absorption of 181,000 sf.

Midtown recorded 712,000 sf. of new leasing in August, a 21 percent increase over July s 588,000 sf but lagging 44 percent behind the five-year average for August of 1.27 million sf. The largest new lease was for 50,000 sf of expansion space by Kasowitz, Benson, Torres & Friedman at 1633 Broadway. Kasowitz, Benson concurrently signed an extension for 100,000 sf at the site.

Midtown s year-to-date leasing activity through August was 6.82 million sf compared to 6.90 million sf for the same period last year, meaning that leasing activity so far this year is now slower than last year in Midtown. Average asking rents in Midtown dropped an incremental $0.22 per sq. ft. in August, settling at $49.32 per sf .

Colliers ABR saw a slight drop in the class A vacancy rate in Midtown, from 10.5 percent in July to 10.3 percent in August. Grubb & Ellis noted positive net absorption, and said that vacant sublet space dropped 7.1 percent, due mostly to Pfizer s move into 274,604 sf of sublet space it leased in February.

DOWNTOWN

Downtown, concessions packages over the past three months ranged from 1 month of rent abatement with no tenant improvement allowance for as-is space to 16 months of rent abatement and $45 per sf tenant improvement allowance for raw space, CB Richard Ellis reported.

Downtown s availability rate rose from 15.0 percent in July to 15.2 in August, and there was negative net absorption of 114,000 sf., which represented a tightening from July s historically high negative net absorption of 774,000 sf.

August leasing activity Downtown was a lackluster 228,000 sf, down 15 percent from July s already tepid 268,000 sf and a fraction of August 2002 s 426,000 sf.

In a month of low leasing activity throughout the city, Downtown s largest new lease in August State Street Bank Corporation s sublease of 84,000 sf from Merrill Lynch at 2 World Financial Center was also the largest in Manhattan. Year-to-date leasing activity is down compared to last year. Downtown rents decreased by $0.48 per sf.

Colliers ABR saw class A vacancy rates rise for the second straight month, closing at 12.7 percent in August, up from 12.4 percent in July. Grubb & Ellis saw Downtown vacancy drop 30 basis points in August to 13.3 percent.

MIDTOWN SOUTH

In Midtown South, concessions ranged from three months of rent abatement with no tenant improvement allowance for as-is space to seven months of rent abatement and $50 per sf tenant improvement allowance for raw space, CB Richard Ellis reported.

Midtown South s availability rate increased from 12.7 percent to 13.1 percent. The market s single largest new lease in August 24,000 sf. at 5 Penn Plaza is emblematic of the preponderance of small transactions in 2003, according to CBRE. In total, leasing activity was 194,000 sf. Year-to-date, leasing activity has outpaced 2002.

Average asking rents in Midtown South also decreased, from $31.41 per sf in July to $31.33 per sf in August.

Under CB Richard Ellis new Concession Values Index, rent abatement and tenant-improvement allowances will be tracked per sf for new leases. Transactions considered include new leases of 10,000 sf or greater for raw space in Midtown, and new leases of 5,000 sf or greater for both raw and as-is space in Downtown and Midtown South, on a rolling-three-month basis.

“The buildings are taller on this side of the Hudson,” was a favorite expression of famed horse trainer Woody Stephens. And the football stadium is grander, could be the refrain of New York Jets owner Woody Johnson. And the Javits Center? State of the art, of course. And who is paying, could be the question being asked by New York City taxpayers. That depends on who one asks and maybe what day of the week.

Under the city s ambitious plans for the far West Side, new office and apartment buildings, a new Jets stadium, an expanded Javits Center and a No. 7 subway line that extends to 11th Avenue will all be a reality in the next ten years, in time for the 2012 Olympics if the city lands them. The area affected would run from 28th Street to 42nd Street, west of Eighth Avenue. Despite the long timeline, the need for some of the changes, like the expansion of the Javits Center, are pressing now, some say.

“The Javits Center is only ranked the 19th largest convention facility in the entire country,” explains Barry Mann, formerly general manager of The New Yorker Hotel and now director of the hotel group at Bernstein Real Estate. “New York City loses 65 to 70 conventions every year because it has smaller facilities than cities one-tenth the size. That makes no sense.”

A new report is set to come out this month that will address the need for expanding the convention center. Commissioned by the convention center itself, it will update previous studies designed to increase support for expansion that were done in 1997 and 2000. Officials were mum about what the report might say, but one said that the center “wouldn t be asking for an update if things hadn t changed a bit.”

The study will look at linking the center to a hotel and a “fixed-seating facility,” like the new Jets stadium proposed for the area. Mann said the idea of linking up a new stadium with the convention center would make sense for both. “If a new Jets Stadium could be multi-use, I d be in favor of it. I don t believe a facility that will be used for only 12 or so Sundays a year is worth building.” But he also added that the Olympics alone might justify construction. “If having the 2012 Olympics in New York is contingent on having the stadium built, I can see it. The Games would be a great economic and public relations boost for New York.”

Agreeing with Mann is Andrew Weiner, a senior real estate partner at the law firm of Morrison and Foerster who worked under famed urban planner Alexander Garvin. “I m also in favor of the proposal to build a stadium which connects to the Javits Center and can be used for showroom and convention space,” he said “A football-only stadium is a lost opportunity. But I believe a stadium that accommodates the Jets and is multi-purpose, particularly if it ties into the Javits Center, is a brilliant urban solution. What you need is a stadium that is in close proximity to a convention center, which isn t the norm. And you need an urban stadium,” he said, adding that generally wasn t the approach in the 1960s and 1970s. “Camden Yards, to a degree, changed that. What you are trying to do is create an entirely new business and residential district on the far side connected along the 42nd street corridor that is connected to the central business district. The design will fail if it s self-contained.”

Bill Dorsey, president of the Cincinnati-based Association of Luxury Suite Directors, said that while New York might not need to build a stadium to enhance its image like a mid-sized city might, the project is still important. “New York and Los Angeles are unique because they don t need a new stadium to complete the city and make it look major league,” he said. “On the other hand, you would think that those cities would want to enhance their reputations by having the best sports venues in the world. And with a multi-use facility, it will be a revenue generator for New York in attracting conferences and other events. New York has the worst venue development record of any city in the country. Privately financed is usually the best way. Both Pac Bell in San Francisco and Gillette Stadium in Boston were built with private monies.”

Such funding issues are, of course, a major question, and haven t been fully worked out. City plans call for spending $1 billion to double the size of the Javits Center. For the stadium, the Jets have said that the team is willing to pay for a major share of the $1.2 billion cost, but the city would have to pay for the retractable roof and the platform over the rail yards.

As present, PILOT (payment in lieu of taxes) has emerged as the preferred method of financing, according to Deputy Mayor Daniel L. Doctoroff. A new public agency would collect PILOTs from developers planning to build in the neighborhood. The new agency could also collect revenues from zoning business bonuses, which developers would pay to build larger buildings than zoning would allow, and through the sale of air rights from adjacent parcels.

Garment workers say the city s plan to develop the far West Side, eventually aiming for 28 million square feet of commercial space and 12 million square feet of residential space over the next 40 years, will harm their industry and drive jobs from Manhattan. The area includes part of the Garment District running from W. 35th Street to W. 41st Street, between Eighth and Ninth avenues. While current zoning carves it out for manufacturing, the new plan would allow office and residential development. Some of the district s 15,000 to 20,000 garment jobs would leave as landlords converted property or sold it for development, union members say.

With money comes lifestyle – and no group is in a better position than the baby boomers. As the nation s wealthiest group, they are starting to think about their plans as they approach retirement. For New York real estate – predicted to outdistance even Florida in total boomer home sales – the future could be bright.

Between cashing out of the stock market, taking advantage of capital gains tax exclusion, and the $10 trillion they will eventually inherit from the World War II generation, boomers have a lot to spend on real estate.

Second homes are where the money is going – empty nesters from the suburbs are now heading to Midtown or Union Square in lieu of quieter uptown neighborhoods, seeking to fully absorb themselves in the bustle of city life. Many are continuing to go big – buying classic 6s, 7s and 8s rather than downsizing.

They re also buying in Florida, too, of course. A full 21 percent of the 78-million strong demographic group (a third of the country) are considering moving to Florida, according to one recent study. But, unlike previous generations, most won t be riding off into the sunset and leaving New York behind. They will still have a place here.

“A second home is almost a normal thing now,” said Howard Lorber, who owns Prudential Douglas Elliman along with chief executive Dottie Herman. “I have four houses, and if you told me I d have four houses a while ago, I d have said you were crazy.”

Herman said the second home market has been growing every year for the last five years, and that growth is expected to continue. “It s been an amazing trend,” she said. Herman s company s “Manhattan to Montauk” slogan appears calibrated to target the second home crowd – suburban empty nesters buying in the city, and Manhattanites and Long Islanders looking for a second home in the Hamptons. The company is looking to boost its presence in Florida, where Lorber already owns another real estate company, Miami-based New Valley Corp.

Despite Florida s lure, a recent retirement housing forecast found that New York will have the highest total number of homes purchased by baby boomer retirees in the nation.

New York outdistanced Tampa, Phoenix and West Palm Beach, which finished second, third and fourth, respectively, in the study by John Burns Real Estate Consulting.

“Part of that is the sheer number of people that live in New York,” Burns said. “But it also shows people are staying there.”

Another study, by Neighborhood Scout, a service that helps match homebuyers with neighborhoods, found some 75 percent of current retirees, the advance guard for the boomers, actually stay near where they currently live.

In New York, some brokers in Manhattan said they are seeing the expected downsizing by boomers, the generation born between 1946 and 1964, now that the older members of group have kids that have moved away. The over-65 population in New York State is expected to increase 39 percent between 2005 and 2025, according to the census figures.

“It s the typical empty nest syndrome where they are moving from large three or four bedroom Park Avenue apartments that they have had for 15 to 20 years and where they have raised a family,” said Stephen Kotler, an executive vice president at Douglas Elliman. “They are typically downsizing to a two bedroom apartment comfortable for them, but with enough room for visiting grandchildren and guests.”

Moving to a smaller apartment is also a way to set aside money for a second home. “Some are cashing in at the current high prices and taking some of that money and putting it into a second home somewhere else,” said Sheldon Joblin, a broker at Stribling & Associates.

Others are downsizing to a one or two bedroom pied a terre for tax reasons. “It doesn t have to be their primary residence so they can take advantage of the tax structure in places like Florida,” said Joblin.

Other brokers said boomers – both those moving into the city and those already here – continue to buy big. Lisa Lippman, a vice president at Corcoran, said she is surprised by how many boomers continue to look for classic 6s, 7s and 8s and two-bedroom plus apartments.

“When I am the exclusive broker, I am amazed that maybe 25 to 30 percent of the people coming to see the large “family sized” apartment are empty nesters, not always just young families,” she said.

One fourth of home buyers aged 50 and older spends more on their new home than on their previous one, according to a national study by the National Association of Home Builders.

Empty nesters traditionally buy in doorman buildings uptown, said Joblin. But he said there recently has been a lot of interest in more active areas like Union Square.

According to Lippman, people she sees from age 50 to 65 don t want to be way up on the Upper East or West Side. “They prefer to be downtown, but also in the 50s and 60s, Central Park South, lower Fifth Avenue, and also lower Central Park West, to be near Carnegie Hall and Lincoln Center,” she said.

Convenience plays a major role in buying a new place for boomers. “In general they are looking for apartments in very full-service buildings,” said Lippman. “They want to be able to walk to work and possibly to the theater.” Otherwise, they are often on the go. “They often have another home someplace else as well, play golf, and travel a lot,” she said. Lippman expects the trend to continue “for the next 10 or 20 years.”

For empty nesters returning to the city, having money means not having to decide. Joblin said about half of his clients in the last few years have come back to the city after raising their children in the suburbs. Most lived or worked here before. “They try a one or two bedroom for a couple of years to see how they like it, while keeping their other home.,” he said. Eventually, they might sell the second home and buy a larger apartment here, said Joblin. Lippman said many boomers get rid of their New Jersey or Westchester home when they decide to by a second home in places like Florida, California, Arizona, Colorado or Wyoming or the Hamptons, while keeping the New York pad.

Kotler said there will be a surge in demand for homes on the eastern end of Long Island as boomers retire. He also said there will be a big market for people who don t want “the big house right on the beach,” but want “something that s smaller and more manageable, but still close.” He said Elliman is currently working with developers who are putting together plans for building multi-unit condo developments in the area.

The suburbs have seen a boom in senior housing as developers and municipalities prepare for the future. Kotler says developments may or may not be attractive to boomers depending on how they are marketed. “I live in New Jersey, and I see adult gated communities for 55 and over that do quite well,” he said. “I don t know that it is as appealing for someone in New York,” adding that he hasn t seen any clients selling their homes in New York and moving to adult communities in the Tri-State area. One reason is convenience. “If you live in New York, everything is here already,” he said. “You just walk out your door and you have it.” In New York, certain segments of the market have been positioned to attract boomers for quite a while, said Kotler. “It s sometimes marketed as a pied a terre, empty nester, or second home,” he said. In some marketing literature, 50-plus baby boomers are even referred to as “zoomers.”

“Sometimes real estate brokers may not be aware of what the buyer s interest is in the apartment and what they are going to use it for,” said Kotler. “It may be an even bigger part of the market than people are aware of.”

With the boomers strong refusal to slow down or accept growing old, it s unlikely they will ever be tagged or marketed to as “seniors”, even when the first boomers turn 65 years old in 2011. “They definitely don t see themselves as becoming senior citizens- they play sports, they exercise, they want to continue working,” said Lippman. “I go to a gym on the Upper West Side and it s filled with baby boomers who work less than they used to because they can and they have a lot of extra money. They are working out at 9 or 10 in the morning before going off to work and they are in great shape.”

Around 75 percent of boomers say they plan to do, or are currently doing, some kind of paid work in retirement and as many as 20 percent plan to work at least 20 hours per week after they “retire.” That s not including the work involved in taking care of their multiple homes, of course.

When Dottie Herman and her investment partner, Howard Lorber, inked a deal to acquire Douglas Elliman this past spring, creating a regional powerhouse with 50 offices and 2,000 agents, the $71 million they spent was the second highest amount ever paid for a residential brokerage firm in Manhattan.

While the price tag topped by Elliman s sale six years earlier to Insignia for $75 million wasn t exactly pocket change, the two real estate partners still have ample funds in their piggy bank.

They intend to spend that money, with ambitious plans to grow in the next few years. Lorber, chief executive of Westbury-based Nathan s Famous Inc., says he has $150 million in cash for expansion enough to buy two Ellimans.

It was Lorber who knew Andrew Farkas, the chief executive of Insignia, the connection that led to the successful purchase of Elliman in March.

Now, Lorber and Herman s expansion plans touch on almost every aspect of the business – from rentals to property management to mortgage services to relocation. Herman, who expanded into Manhattan from her perch as head of Prudential Long Island Realty (now Prudential Douglas Elliman), has plans to acquire 15 more firms on Long Island. The duo also has their sights set on acquiring companies or increasing their presence in Brooklyn, Florida, and of course, Manhattan. Consultants have periodically been sent in from Prudential Real Estate s Irvine, Calif.-based head office in the past few months to help Herman and Lorber evaluate their options.

“We see many opportunities for expansion,” said Herman, who has said that her dream at Prudential Long Island Realty had always been “to connect Manhattan to Long Island through a real estate firm.”

Most immediately, the company is about to do a “small acquisition” on the North Fork of Long Island which should be announced in the next couple of weeks. Herman broke into the East End in 1997, and now has six Hamptons offices and branches on the North Fork.

To fulfill the company s slogan “from Montauk to Manhattan,” Herman is also looking to make her first big foray into Brooklyn. Her company has already done a number of development jobs there, and is on the local real estate board, but doesn t have a storefront. Rather than starting from scratch, Herman said she might prefer to acquire another company, benefiting from brokers who already know the area. “If we find a good company, I d rather it be an acquisition than starting something new,” she said. Prudential already has offices in Queens.

In Manhattan, the company is also looking to acquire mid-sized firms. Lorber said the company considered buying the 60-broker residential arm of Charles H. Greenthal, which was purchased by Coldwell Banker Hunt Kennedy in August, but ultimately decided against it. “There was high overhead, and business was trending downward,” he said. “There was nothing there.” Charles H. Greenthal Group recorded $275 million in residential sales according to Crain s New York Business Book of Lists 2003.

The second-home market, which Herman notes has grown for the last five years straight and is expected to continue expanding, is another area the partners are targeting. The company is looking to increase its efforts in Florida and California. “Florida is one of the main destinations for people from Long Island and Manhattan,” said Herman. California has the highest number of million-dollar homes in the country, and Lorber notes that there are “a lot of people from California buying in the Hamptons.” Even so, there are no plans to open satellite offices in either location anytime soon. Instead, the company will try and boost its relocation business not a big revenue generator but hopefully a place to get leads on clients who want to buy second homes elsewhere. Lorber already has real estate investments in Florida, serving as president of Miami-based real estate firm New Valley Corp.

Besides sales, the company is also looking for growth in other areas like rentals and property management. Lorber has high hopes for increasing Elliman s presence in the sub-$5,000 Manhattan rental market. The market has undergone change in the last decade, with many smaller neighborhood firms disappearing. Citi Habitats has taken a lot of the market share. “[CEO] Andrew [Heiberger] did a great job in the rental market,” said Lorber. “They are trying to grow their sales now. We want to grow rentals. I think it will be a lot easier for us to go where they are, than for them to get where we are.” Herman said she has a “customer for life” approach to rentals, taking account of the fact that today s young renters will be tomorrow s buyers.

Property management will be another focus, with Lorber looking for opportunities in both New Jersey and Long Island as well as Manhattan. Lorber said he aims to the double the size of Douglas Elliman s property management division, which now consists of 60,000 units. The key is to focus on property management in its own right, rather than seeing it as an adjunct to sales. “We re the largest by about three times the next competitor,” he said. “We realize there is a lot of upside to property management. You can t look at it just for leads, you have to provide great services. It is a great stand alone business.”

Prudential is also looking to maximize the money it makes from each sale. The company has started its own mortgage and title business, and has been considering providing property and casualty insurance services. The company first entered the mortgage business two-and-a-half years ago on Long Island, partnering with industry veteran Marcia Kaufman. The firm, Preferred Empire Mortgage Co., expanded to Manhattan in the wake of the Elliman purchase, opening its first office with 25 mortgage brokers in Midtown this summer. Prudential also created a title company earlier this year, Liberty Land Title Agency, to serve clients, and an insurance business may be in the works. Herman said the goal is to provide a one-stop shop that will supply all the services a client needs when they make a home purchase. (See story on one-stop brokerage firms on page 6).

There is also the issue of Herman and Lorber s affiliation with Prudential. Prudential Long Island is half owned by Lorber and 40 percent owned by Herman. The remaining 10 percent belongs to Prudential, and Herman is able to buy out Prudential s stake in the next 10 years. Lorber and Herman both said they are happy with the support they have gotten from the corporation. “They re great,” said Lorber. “There are no plans to change anything now. When it doesn t make sense, we will take them out.”

Home buyers want more convenience from residential firms. Last year, a survey by the Real Estate Service Providers Council found that 82 percent of buyers would strongly consider using a “one-stop shop” that provides a range of in-house services, rather than running around to different companies that individually handle sales, mortgage, and title insurance.

Real estate firms across the nation already have caught on to that consumer preference, with about two-thirds of larger companies offering mortgage and other services. Manhattan, as usual, has been slow to catch on to the national trend until now.

Two big firms Douglas Elliman and the Corcoran Group have begun to start offering mortgage services. Other companies may be considering starting them up soon. The trend has drawn concern, however, from some in the mortgage industry, who warn that the arrangement may lead to potential conflicts of interest.

“It s always best for consumers to have a disinterested party,” providing mortgage services, said Richard Russell, president of Richland Equity Resources, a mortgage specialist. “For the consumers, it doesn t give them all the options available to them.”

Firms who have started providing mortgage services disagree, noting that consumers are free to go elsewhere and citing convenience as the reason why they probably won t. Corcoran is currently in the process of launching a mortgage division, with chief executive Pamela Liebman recently saying the division will be a part of Cendant Mortgage. She said the mortgage division has been working out kinks involved with lending to co-ops.

Douglas Elliman has also begun offering mortgage services. A Long Island-based mortgage company started by chief executive Dottie Herman two and a half years ago began operating in Manhattan this summer. The firm, Preferred Empire Mortgage Co., currently has around 25 mortgage brokers in offices on 42nd Street, a number that will increase to around 60, according to Macia Kaufman, the company s chief operating officer. The mortgage company will also have between one and five mortgage brokers in each of Elliman s nine offices in Manhattan.

On Long Island, the mortgage business has been very successful, said Kaufman, a 20-year industry veteran, drawing in 44 percent of the buyers who use Prudential brokers.

Herman said it s the added convenience that has attracted buyers to use the mortgage service, and that the idea is long overdue in Manhattan, where people are generally very pressed for time. “Consumers are busy, and if they feel comfortable, they would just as soon get some of the services from us,” she said. “We re trying to make it easier for people.” She said Manhattan is behind the curve, but that things are starting to change. “It s been happening in Florida and California and elsewhere for a while. New York is the last holdout. It s been slower.”

Kaufman said her company is able to speed up the home buying process considerably. “In many cases, we can issue a commitment letter at the initial meeting,” she said. As far as choices, “we bring to buyers all the different banks that are out there.”

Kaufman said Preferred has the best of both worlds, because it is owned by Prudential but still generates some 60 percent of its business outside the company. “Being closely held, we re more accountable,” she said. “On the other hand, this has to run as its own business.”

She emphasized that buyers using Prudential don t have to use her company at all and that there is full disclosure about Preferred s relationship with Prudential. “Nobody has to use us we have to show there is a value,” she said. “We earn our business.”

While the overall relationship is a positive one, Kaufman does acknowledge that situations can get tense when a real estate agent wants a deal done and calls up complaining to top brass like Herman when Preferred turns down a deal. “You have to explain bad deals that can t be done,” she said.

Other companies have different arrangements. Kaufman said she sees some mortgage companies paying “a tremendous amount of money to get exclusive relationships, or to do a joint venture.”

Firms like Manhattan Mortgage Co. have exclusive relationships with real estate firms, paying to list its services on the Web site of Halstead, for example. Kaufman claims that in such arrangements, there is often “lack of continuity” for buyers if affiliations change.

She gave the example of Daniel Gale, a Long Island residential firm, which recently entered into an agreement with Wells Fargo, after using IPI for its mortgage services. In addition, smaller firms often try to start up mortgage services, too, often with varying success.

Mortgage broker Russell said small firms often need to make as much as possible for each transaction. “It usually doesn t work,” he said. “It takes a while to get expertise and build up contacts with lenders.”

Overall, the trend towards residential firms having mortgage affiliates won t have a major effect on traditional mortgage lenders, said Steve Schnall, chief executive of the New York Mortgage Company in Manhattan. “It might cut into business a little,” he said. “But there is a lot of business out there.” In contrast with Kaufman s figures, he said the highest amount of business he s heard a mortgage affiliate capturing from its parent company is 25 percent of buyers. He said the national average is closer to 11 percent.

“There is basically no economic incentive for the real estate agent” to provide referrals, he said. “Some of them resent doing it. They are independent contractors, and some of them have long-standing relationships with [mortgage brokers] who have been an integral part of their success.”

Schnall said some companies have sought ways to provide incentives to agents to increase business.

One way agents can be paid without violating RESPA [Real Estate Settlement Procedures Act], the rules which govern closings, is by taking part in the mortgage origination process. “But you actually have to do the work,” said Schnall. “And not only do you have to do the work, you have to be good at it to compete. It s hard enough to be good at one thing, and it really hasn t caught on.”

Schnall said that while residential firms throughout the country have added mortgage services, Manhattan may be slower to implement the changes for good reason. “There might be economic reasons why the trend hasn t take root here,” he said. “You really have to be focused. You re dealing with more complicated entities like co-ops, and you ve got sophisticated buyers in Manhattan.” Schnall also notes that in the mortgage industry as a whole in Manhattan, there have been few meaningful entrants into the business in the last ten years. “It s a tough market to crack,” he said.

The Lower Manhattan residential real estate market today is a very different reality than one might have imagined soon after the Sept. 11 attacks, when worries about personal security and environmental safety caused many residents and businesses to flee the area. Where the prospect of a terrible meltdown once loomed, the market has recorded an astonishing comeback.

A major incentive in keeping and bringing people to the area has been the Residential Grant Program of the Lower Manhattan Development Corporation (LMDC). Now that the application period for grants has ended, many in the real estate industry say they are confident that the gains made over the last two years will not be reversed, and regard the program as a springboard for what they hope will now be a self-perpetuating, strong market.

The residential grant program, which began last June and which stopped accepting applications in May, aimed to halt occupancy rates which plunged to around 60 percent after the attacks, LMDC spokeswoman Joanna Rose said. The program received more than 40,000 applications, and some $188 million in program funds have been awarded so far. The program has led areas like Battery Park to record its highest occupancy rate ever, around 97 percent. A spokesman for Downtown Alliance, a group dedicated to the economic and social development of the area, said the 3 percent vacancy figure applies to downtown in general.

Under the program, monthly assistance payments were offered to people who were willing to make a two-year commitment to live in the downtown Manhattan area. Residents who live in Zone 1, the area closest to the World Trade Center site, receive $500 a month, while those living further away from the site receive $250 a month. Landlords under the program can charge no more than 95 percent of the rent prior to Sept. 11.

Many in the industry, including officials at The Real Estate Board of New York, said they don t believe gains will be reversed, and that the program lasted the right amount of time. “At REBNY, we ll probably argue for longer incentives to bring more results,” said President Stephen Spinola. “But I think the two-year period was appropriate, and if we find increased vacancy rates in six months, then we ll rethink that,” he said, adding that the program “has been a huge success.”

Douglas Wagner, president of Manhattan brokerage firm Benjamin James Associates Inc., predicts that vacancy rates will continue to be low since buildings are full, Pace University is back downtown and hiring is occurring again on Wall Street and people want to live close to work.

Others say that, for the moment, business volume has not taken a hit three months after the end of grant applications. “I did more business when the grant was available, but business is still strong,” said Herbert Cheng, a real estate broker in the financial district.

Cheng also noted that the area is still popular and people get more square footage for their money than in other parts of Manhattan, because the converted office buildings in the area have larger spaces.

Far from ending too soon, Andrew Heiberger, President and CEO of Citi Habitats, thinks the program was actually quite generous, saying he didn t think residents needed to be paid $500 per month as an incentive to rent a one-bedroom apartment. He said a $300 incentive for a one-bedroom apartment would probably have done the job.

In addition to boosting occupancy rates, the program has also delivered new residential properties to the downtown marketplace as buildings went from commercial to residential use. “Residential conversions are going on in Lower Manhattan involving both previously commercial units and brand new units. There s been 26,000 new units in Lower Manhattan since Sept. 11 and incentives like the residential grant program have helped a lot,” said Downtown Alliance spokesman Bryan Evans, who said the program has had a “tremendous effect.” Cheng said that when offices relocated from the area after Sept. 11, it made more sense for the owners to convert them to residential uses rather than allow them to be vacant, and that the grant program was helpful in getting these new units quickly reoccupied.

Entirely new residents have also appeared in the area. Recalling that people moved into the area from places like Astoria and Hoboken, Wagner said that by lowering the cost of rentals, the grant allowed people who could not live in the area before Sept. 11 to afford it.

“For $1,250 or $1,350 a month, you can rent a one bedroom apartment and that s the only place apart from rent stabilized tenement buildings where you could do that,” he said. The areas around the World trade Center site, part of Zone 1, have benefited the most from the influx of new residents. Rose said that over 50 percent of the current residents in this area identify themselves as new residents.

For all its acclaimed success, though, the program has been far from a hitch-free operation.

Lately, attention has been focused on those who sought to abuse the program. Rose said that some people who either did not live in the area or moved out of the area in violation of their two-year commitment had received monies under the program.

An amnesty program set up by the LMDC, which had a deadline of September 30, was meant to give such people a one-time opportunity to return grant money and avoid prosecution.

Spinola thinks the LMDC s amnesty program was “the absolutely right decision,” since there may have been people who had legitimate reasons to leave Lower Manhattan. “I have not heard that it was a significant problem,” he said. “After all, we give amnesty programs for parking tickets, and for people to bring in their guns. This is an issue of money and it was an emotional time.”

However, despite the amnesty issue, there is a broad consensus that the LMDC has achieved its goal of restarting the real estate market in the area and rescuing it from looming disaster. Now a strong momentum has kicked in, many say. “LMDC was the springboard for what is now a self-perpetuating strong market,” Wagner said.

Thanks to a $12 million advertising campaign, potential home buyers and sellers in New York have been exposed to Foxtons, the two percent discount brokerage, through ads on radio, in newspapers, on subway cars, billboards, trucks and even on bus shelters.

But the West Long Branch, NJ-based company does find a particular drawback in getting the message out in Manhattan.

“We can t put up yard signs in New York,” said Glenn Cohen, the founder of Foxtons North America, which operates in the Tri-State area. “That s a pain in the butt for us.”

Perhaps that s for the best. In London, where Foxtons was founded before expanding to the U.S. in 2000, the company is known for its aggressive tactics. One yard sign wound up in the front yard of Alastair Campbell, the press secretary to Tony Blair. Campbell s home wasn t even for sale.

Closer to home, many in Manhattan residential real estate have taken exception to the company s business plan and ads which offer to sell homes at one-third the standard commission of six percent. Many call it a “bait and switch,” saying the company is not delivering on what it is promising. Others have praised the company. In its June 2003 issue, Money magazine referred to Cohen as the Charles Schwab of real estate, stating, “The real estate commission may be going the way of the $200 stock trade.”

Advertising aside, how big is the company s presence in New York? What is bite and what is mere advertising bark?

The number of employees is fairly modest. Cohen said the company has around 15 agents who operate in Manhattan, up from 10 when the company started in New York in January 2002. While the company has space at 30th Street and 7th Avenue, according to Cohen, agents “mostly don t operate out of the office.”

Another Foxtons employee said a visitor to the location wouldn t find any agents there, presumably because they drive in from New Jersey. Overall, Cohen said Foxtons has 400 employees in the Tri-State area, including 280 agents, though some publications have reported the number of agents as lower. Around five to 10 percent of the company s business is done in Manhattan, Cohen said.

Foxtons large advertising campaign does not appear to correspond with any astronomical expansion, either, though the company has undergone solid growth, according to Cohen s figures. He said the company grew 20 percent last year, and that he hopes the company will continue that pace in the future.

In advertising, the company has benefited from a relationship with Viacom, the global media company with an outdoor advertising division. Andrew Heiberger, president of Citi Habitats, who says Foxtons is “anti-broker” and can t survive with its current business model, said the company gave Viacom a piece of the ownership in exchange for free advertising. “That s why they got the name out so quickly,” he said. “Now its back to reality.” Cohen acknowledged Foxtons does have a relationship with Viacom, though he said Viacom doesn t have an ownership stake. “It s just a nice partnership,” he said. “They have a lot of vehicles. We also buy advertising in bulk.” Cohen said his company s approach to advertising utilizing outdoor and other venues as well as newspapers gives it a leg up over the competition. “Traditional real estate companies don t understand advertising,” he said.

But it s the services touted in the advertising that are drawing the ire of much of the Manhattan residential real estate community. Neil Binder, principal of residential firm Bellmarc, said that Foxtons is “creating a false impression” in implying sellers will get a full range of services for two percent commission. “It s a come on,” Binder said.

“At the end of the day it s not going to be two percent,” agrees Heiberger. Even if the company operates under the two percent model, Heiberger maintains the services would be inadequate. He said the company shortchanges sellers in not conducting weekly open houses, in not marketing properties to the broker community or mounting professional marketing campaigns, in not being able to draw enough traffic to its Web site, and in “not having the patience required to work for three or four or five months to get a top price.” Says Heiberger: “It s very na ve and unprofessional of them to think all a broker does is list and show. Forget the two versus six percent issue. You could lose out on, say, 14 or 15 percent of the value of your home in selling it incorrectly.”

Cohen said the company doesn t lack services at all. The only thing sellers must do differently under the two percent commission plan is to show their own homes, he said. Agents can do this for an additional commission, but Cohen said around 80 percent of the deals the company does, in fact, end up being two percent commission. Cohen said the company screens and pre-qualifies all potential buyers before they arrange appointments to see a home. The company also uses floor plans and virtual tours to further whittle down the number of showings a seller might have to conduct. “If it s a $500,000 apartment, and five people come and see it before someone buys, you ve just saved yourself $20,000 in commissions, or $4,000 a showing. I d say that s a pretty good deal,” he said.

In terms of marketing, the company “brings a million unique visitiors to foxtons.com a month,” Cohen said. A look at the site revealed 139 listings for Manhattan. Foxtons also does not allow clients to list with other real estate agents, unlike traditional brokerages, which permit multiple listings, though it guarantees newspaper advertising for listings, like most firms. Cohen also touts Foxtons toll-free hotline, which is open seven days a week. “Traditional agents tend to not answer the phone,” he said. “But you can call us up and any speak to any agent, and they will be able to access all your information on our database.”

Cohen is nonplussed by the criticism he receives from other companies. “The brokerage community hates us because we charge much less and operate much differently,” he said. “Consumers love us for the same reasons.”

In the battle over commissions, Cohen said rival companies “have encouraged people to complain” about Foxtons.

Peter Constantakes, Assistant Secretary of Public Affairs for the Department of State, said there have been 25 complaints lodged against the company, “mostly dealing with the fact that people were thinking they were getting full services for two percent,” he said. Constantakes said the number of complaints wasn t necessarily very large, and that they had been satisfactorily closed. “With the number of clients they are dealing with, it is not unexpected,” he said. “There hasn t been any widespread thing.”

“But it s something we ll continue to monitor on an on-going basis,” he said.

Lofts tend to spring up in neighborhoods that are quiet. The desertion of industry and commerce from the area is often the condition that allows for the creation of lofts in the first place.

So if you want a loft in a quiet neighborhood, there are plenty to choose from – Tribeca, Dumbo, the far West 20s.

But if you want a loft in one of the most central and dynamic areas in Manhattan, go to Union Square.

The area, hot since the mid-1990s following decades of decline, continues to be “young, exciting, trendy, upbeat and high-class,” says Douglas Wagner, president of Benjamin James real estate agency. “Between theater, restaurants and parks, there is something for everybody down here.” Over 100,000 students more than Ohio State and Notre Dame combined – are enrolled at nearby schools and suffuse the area, whose top attractions include the Union Square Greenmarket, called the best farmers market in the country, top restaurants like the Union Square Caf , trendy nightlife, mega-music stores, and one of the city s most central subway hubs.

While young students might provide for much of the area s vibrancy, they are unsurprisingly not the ones living in the area s choice apartments – the high-priced lofts overlooking Union Square Park. Ken Scheff, Director of Sales for Downtown at Stribling & Associates, says that the loft district extends from Park Avenue South, Union Square s eastern boundary, to 7th Avenue, well beyond the neighborhood s western edge. There are some eight to 10 rental buildings in the Union Square area that cater to college students and new hires, including two New York University dorms. To the east of the neighborhood, one starts to run into more co-op buildings.

Those who buy lofts on Union Square Park are a broad mix. “Largely it s people who are attracted to the cultural landscape,” says Wagner. “We see people with a bit of a pop culture aspect, people who work in food services and entertainment. Buyers are generally at the top of their career.” Young professionals and baby boomer empty nesters are also buyers in the area. “We see people coming back from the suburbs to buy here,” said Scheff. He said there are few families in the area, but Rob Gross, a senior vice president at Douglas Elliman who lives nearby with his family, said they are “not as much of a minority as one might think.” Gross said he sees a diverse range of buyers. “There are straight couples and gay couples, and people in the arts, like photographers, who work at home,” he said.

While residential vacancy is very low in the area around 1.5 percent Gross said there has been some softness in the market for apartments above 3,200 square feet. “Three or four years ago, large wholesale spaces were more in demand,” he said. These days, he said, an increasing approach among developers “is to go smaller and let people combine apartments instead.” The mid-loft range from around $1 to $1.5 million has been strong, however. Gross gave the example of a 1,600 square foot loft at 105 Fifth Ave., above Barnes & Noble on the western edge of the Union Square neighborhood, that he recently sold in ten days. Gross said raw, unimproved space in the area runs around $500 to $600 a square foot, average properties run between $600 and $800 a square foot, and condos with high-end finishes go for around $700 to $900 a square foot.

Zeckendorf Towers, the 652-apartment condominium and office complex whose opening at the southeast corner of the park in 1987 heralded a resurgence in a neighborhood that had long been in bad shape, continues to remain a popular address. Douglas Elliman recently opened up an office in the building. Scheff said there is a “good mix” of residents in the building, including more families than elsewhere in the neighborhood, and a good gym. But he also pointed out that the apartments built there are generally “more modest than what is built today. So you see a lot of apartments combined.” Prices run about $800 a square foot in the building, he said, and in some cases those prices could be much higher than the averages.

As far as new development in the neighborhood, there is very little, said James. “For the time being, it sort of is what it is,” he said. “There aren t a lot of new parcels out there,” said Gross.

One exception, though at 21st Street, a bit north of the neighborhood, is a project at 260 Park Ave. being handled by the Douglas Elliman Development Marketing Group.

The project is a conversion of the former Manhattan headquarters of the United Federation of Teachers Union. The 200,000 square-foot building will be converted into approximately 100 one- to three-bedroom condominiums, with ground floor retail stores and basement space that will include storage for the unit owners.

While from a residential point of view, “gentrification is complete,” according to Scheff, the area is still evolving on the retail front, particularly on 14th Street. The “green” image established by the Union Square Greenmarket will be further bolstered by Vornado Realty Trust s redevelopment of the former Bradlees Department store on the southern side of Union Square Park. The building will have a 50,000 sf Whole Foods, though an opening date hasn t been announced. Forever 21, the juniors retailer, also signed a lease last fall for a two-level, 26,000-square-foot store in the 4 Union Square South building. Cantor Fitzgerald, the bond broker that lost 658 employees in the attack on the World Trade Center, has floated an idea to build a new headquarters on the upper floors of the building.

Fourteenth Street, the main east-west artery passing through Union Square, has seen improvements in recent years, but still lags behind the rest of the area in terms of commercial development. One broker said he believes that 14th Street is “about halfway done.” “It s not going to change with a crash and a bang,” says Gross.

Another place that continues to evolve in terms of retail is the neighborhood s side streets. “The side streets are getting a bit more energized,” said Gross. “17th Street [between Broadway and Fifth Avenue] is a good example. You ve got nice little casual restaurants. You ve got places like City Bakery nearby.” Overall, he said, “I m really seeing restaurants and retail keeping pace in the area. Everything is becoming more sophisticated.”

Wagner had a different take on the situation, however, saying he was seeing more vacancies in the area than he had in the last ten years.

“I walk each day from 20th Street and Broadway to 14th Street and Fifth Avenue. I m seeing store vacancies left and right.” He said storefronts cost upwards of $20,000 a month, a situation that is “too challenging for tenants.” Landlords are holding out for high prices, “waiting for companies to feel the confidence to take space,” but Wagner said what might happen is that the market will see a correction, and rents will come down.

Even if vacancies are up, Union Square remains red hot. A century ago, that was also the case. In the 1900s, it was the cultural and political epicenter of the city, with the Academy of Music, vaudeville theaters and Tammany Hall. Macy s, Tiffany s and other major retailers lined 14th Street.

A new generation of department stores came in during later years, but around 35 years ago the area began to slide into deterioration, its middle-class shops shuttered and Union Square became a mecca for drug dealers and the homeless. A turnaround eventually came, helped by the Greenmarket, a multi-million dollar restoration of the Park, and the building of Zeckendorf Towers.

“People were talking about Union Square getting cleaned up back in 1987,” said Scheff. “I was embarrassed to mention it, because I didn t think it would happen. But by 1995, the transformation was tremendous.”

An elegant, landmark brownstone on West 123rd Street could set a new standard in Harlem real estate. The 10-room, seven-bathroom townhouse went on the market in August for $2.9 million, later reduced to $2.5 million. Even at the lower figure, agents said the price would surpass previous sales for brownstones in the neighborhood.

At a recent open house, neighbors in Mount Morris Park came to see what $2.5 million now buys in Harlem. After seeing the home, one neighbor doubted it would sell for that much but said “anything’s possible.”

In Harlem residential real estate these days, that’s the question what’s possible and what’s hype. Several agents and landlords said home sales remain at pace with the overall market, but rents are dropping for high-end apartments.

“My feeling is that it is not like it looks,” said one agent for a Harlem real estate company who declined to be identified by name. “The prices people are talking about, they are really inflated about 30 percent.”

Brokers and owners reported rents dropping ten, 25 percent or more to get tenants. These reductions could be because landlords downtown are peeling off tenants with bargains at the same time as an infusion of new units to Harlem.

“I definitely saw a softening of the market,” said Karen Phillips, who dropped rents 25 percent on three units in her Harlem brownstone to get tenants. Phillips is a member of the New York City Planning Commission and a founder and former head of the Abyssinian Development Corporation in Harlem.

“It was distinct. I moved here in November,” Phillips said of her renovated brownstone. “The real frenzy has slowed. The market is slower, and there is a real over-saturation.”

Agents and landlords say the range for rents can be wide given Harlem’s size and housing stock. One-bedroom, floor-through apartments can rent for between $1,300 and $1,800, and two-bedrooms can go for between $1,800 and $2,400. For home sales, top-of-the-line “20-foot-wide” brownstones sell for between $1.2 million and $1.5 million, agents said. Narrower brownstones without details generally sell for under a million dollars.

“One of the reasons that Harlem has a lot of hype is because you can still get a lot more for your money,” said Vie Wilson, a vice president at The Corcoran Group who specializes in Harlem.

Wilson deals mostly in home sales, and now she s got 10, two-bedroom condominiums in the Sugar Hill section on the market. Prices range from $339,000 to $489,000, which Wilson said would easily double if the condos were on the Upper West Side. Interest in the condos is heavy.

Five years ago, when Wilson started work in Harlem, she couldn’t get people to home shop there. “Not the case anymore,” Wilson said, noting the revived shopping along 125th Street that is helping to pull people uptown. “It has changed as a result of retail and as a result of people buying.”

Still, Wilson and others say Harlem is in the process of gentrification and not yet gentrified, which serves as a check on prices. Some blocks are tree-lined with wide, stately brownstones while others are spotted with abandoned buildings awaiting renovation. Well-preserved, historic areas — Mount Morris Park, Striver s Row and Hamilton Heights have bustling real estate sales, but other areas aren t as busy.

“I think you have some people who think they want to live in Harlem, but they don t understand that you have to live with people in Harlem,” said Amanda Jhones, an agent for Douglas Elliman. Jhones declined to say whether racial prejudice kept them out.

Jhones is the agent for the 123rd Street brownstone selling for $2.5 million, and she s confident she’ll break a Harlem sales record with it. For Manhattan, a “20 footer” with a hot tub in the cellar, an elevator, garden apartment, and 5,000 square feet selling for $2.5 million is a deal, she said.

“If it were anywhere else, I could put a $7 million price tag and nobody would flinch,” Jhones said. “But what I m getting is, ‘Oh, it s Harlem.’ But what s wrong with Harlem?”

Even with a drop now, Harlem real estate is a world apart from 15 years ago when devastation gripped the neighborhood. The 123rd Street brownstone, for example, was a caved-in shell in the mid-1980s before its current owner, Fred Eastmond, got it through a city housing lottery and painstakingly restored it.

Phillips, who helped lead the comeback through Abyssinian Development Corp., said the idea for Harlem was to get economic variety and build a housing market where one didn t exist. The strategy worked, but the market might have moved faster than expected, she said, in part because of an illegal flipping scheme in the late 1990s that artificially inflated neighborhood sales prices. Now the debate is how to keep more middle-class residents in Harlem instead of how to attract high-income families.

While the dropping rents may offer bargains to apartment hunters, they could pose a problem for new brownstone owners looking to pay a mortgage with rentals, one agent said. With average renovation costs running at $100,000 a floor, it s not hard to end up with a million-dollar mortgage.

Still, families are still looking to Harlem as a place for reasonable prices in Manhattan. Ray and Clara Santos went to the open house at the 123rd Street brownstone recently, although just to look.

“Too expensive,” Clara Santos, 33, said as she left. They want a Harlem brownstone for the family, which includes two kids, for between $700,000 and $1 million, and they re confident they ll find one in that range.

The family now lives on 106th Street and Broadway, but can t afford anything in that area. “I really want a brownstone,” Clara Santos said. “I couldn t afford one anyplace else.”