Wall Street bonus outlook could be worse

By Candace Taylor | November 06, 2008 02:57PM

A report predicting that Wall Street bonuses are expected to fall dramatically this year was no surprise to real estate professionals, who have been bracing for a corresponding drop in sales.

In fact, the report came as positive news to some brokers, who said they expected Wall Street bonuses to virtually disappear.

“Most people have anticipated no bonuses,” said Leonard Steinberg, an executive vice president at Prudential Douglas Elliman. “I would imagine brokers are going to be shocked that bonuses are getting paid at all.”

The report, released today by New York-based compensation consulting firm Johnson Associates, predicted that senior managers on Wall Street can expect their year-end incentives to plunge by up to 70 percent from last year. Average bonuses on Wall Street are expected to decline by an average of 20 to 35 percent this year compared to last year, the report said, while investment bankers and fixed income professionals will be hit hard, with their bonuses expected to drop by up to 45 percent.

While the outlook is grim,  it could have been worse, according to Alan Johnson, managing director of Johnson Associates. “Those professionals who were fortunate enough to keep their jobs will see the fallout when they get their year-end bonuses,” he said. “However, thanks in part to the financial bailouts and mergers we’ve seen recently, the decline in incentive payments won’t be as drastic as first thought.”

The projected bonus figures “sound like more money than I would have expected, given all the anti-Wall Street sentiment out there,” said broker Dolly Lenz, a vice chairman at Elliman.

She said most real estate professionals have already seen the impact of the expected decreases in bonuses in the form of a slowdown in sales, though there is still some activity.

“I signed three contracts today,” she said, “but maybe it would have been six [before the financial crisis]. A lot of people are taking a wait-and-see attitude.”

Yearly, Wall Street bonuses have close ties to the success of the New York City real estate market, according to Jonathan Miller, the president of appraisal firm Miller Samuel.

“The industry does see a surge in demand in the first half of the year and that demand correlates with whether bonuses are higher or lower than previous years,” he said.

But the part of the report that was most surprising is that top-level management saw the sharpest decreases.

“It may impact the very high end,” Elliman’s Lenz said. “Those people are all trade-ups. It’s a choice you don’t have to make. You can stay in your 10-room apartment — you don’t need to move to a 14-room apartment.”

Andrew Gerringer, managing director of Elliman’s development marketing group, said job losses could pose more of a threat than reduced bonuses.

“I am more concerned about jobs than I am the bonuses,” he said. “If people still have jobs, they have to live somewhere. But if you don’t have a job, you’re not going to get approved for a mortgage.”