TRD forum: The state of LA’s luxury market, according to top brokers who live and breathe it
TRD panel explored the spec home craze, the state of brokerage and more
Angelenos are no stranger to high price tags, but with the Chartwell home listing for a record $350 million, has the bar been raised cartoonishly high?
Talk of Mr. Gucci, clients demanding bulletproof windows and the record-breaking Playboy mansion sale were among the topics that bounced around the Bank of America Plaza auditorium at The Real Deal’s first Los Angeles forum, where residential industry leaders came together to discuss the state of the market.
With a massive influx of global capital flowing into L.A., the city has become a luxury destination to rival the likes of New York and London, brokers said. But how much is too much, and how can brokers and developers stay realistic?
“The agents are telling developers what they want to hear and not what the reality is,” said Mauricio Umansky, co-founder of the Agency. Umansky said that when there was such a disconnect between asking prices and what buyers will pay, even a massive sale will end up looking like a defeat.
“When you hear that a $300 million house ends up selling for $100 million, the news is that you sold it for $200 million less,” he said.
“The luxury market is very fickle,” said Ben Bacal of Rodeo Realty, who said buyers want an increasingly demanding list of home features that includes bulletproof windows. “Los Angeles is coming up, but it’s slow.”
Rather than selling the “tangible value” of a property, listings are “selling the sizzle of L.A.,” said Kofi Nartey, who heads Compass’ sports and entertainment division. “We’re seeing a lot of these properties being priced [high] as a marketing strategy.”
Coldwell Banker’s Jade Mills advised agents to have the tough talk with their sellers.
“We all lost listings recently that we just couldn’t take and we’re just walking away from,” she said.
If you don’t walk away, said Michael Nourmand of Nourmand & Asssociates, you risk being the “the sacred cow that is going to be slaughtered” before the next brokerage gets the listing at a more reasonable price.
But despite the record asks, Aaron Kirman of John Aaroe Group argued the homes, on the basis of price per foot and amenities, offer more bang for their buck than other global hotspots.
“We’re still cheap compared to other cities,” said Kirman, who shared some of his tricks to finding new pockets of international wealth – such as tracking flight patterns and natural resource booms.
The conversation, moderated by TRD’s editorial director Hiten Samtani, then touched upon the flurry of consolidation happening in residential brokerage and how it impacts talent retention. This summer, Pacific Union swooped up Partners Trust, hot off the heels of acquiring John Aaroe Group, and New York-based Douglas Elliman bought Teles Properties.
“The consolidation is great — the purchase of Teles and the Pacific Union acquisitions made a lot of sense,” Umansky said. “L.A. has changed dramatically and that’s brought in new players.”
But with new entrants comes poaching. Residential brokers shared their comments on Compass, the venture-backed brokerage that made waves in L.A. by poaching top brokers — allegedly with huge signing bonuses.
Nartey, who routinely works with star athletes such as Stephen Curry, said that fewer than 3 percent of the agents that joined Compass were given signing bonuses. Nourmand said the financial incentives often manifested in different ways, such as through generous marketing budgets for new agents.
When Umansky, a critic of Compass’ poaching strategy, was asked to comment specifically on the brokerage, which he’s had choice words for before, he said: “I think it would be unfair for me to give my opinion without Robert Reffkin here.”