With dealmaking in the dumps, CRE brokers adjust

Brokers head back to the drawing board as sales and leasing markets freeze up

(Illustration by Kevin Rebong/The Real Deal; images via IStock)
(Illustration by Kevin Rebong/The Real Deal; images via IStock)

The dining room at Fresco is a streetwise spot to take the pulse of the Big Apple’s real estate market.

Seated among politicos and finance types in the Midtown East power-lunch fixture you’ll find some of commercial real estate’s power brokers, who can be overheard riffing on the city’s next megadeals with clients over antipasto and rigatoni bolognese. 

But with rising interest rates, empty offices and a rattled lending landscape, the scenes at the lunch table sure ain’t what they used to be. 

“The conversations are different,” said Newmark’s David Falk. “There are a lot more questions.”

The market slowdown has many brokers trying to figure out where the next commission check will come from. The cliché  about brokerage, after all, is it’s an “eat-what-you-kill business,” and the prey seems to be getting scarcer. 

Investment sales have plummeted. New York City saw just $5.3 billion worth of deals in the first quarter, a 52 percent decrease from the same period last year, according to Ariel Property Advisors. Blame the Fed’s interest-rate hikes or distributed work’s devastating impact on office usage or the lack of capital — the truth is likely a cocktail of the three. Some corners of the sales market are all but dead: Sales of office buildings were under $500 million, down 85 percent from a year earlier. 

On the office leasing side, things look a little — but just a little — rosier. 

In the fourth quarter of 2022, leasing activity fell more than 40 percent, to 5 million square feet, compared to 8.6 million square feet a year earlier, according to Colliers International. But first-quarter volume, at 7.4 million square feet, was just 3.5 percent under what it was in the same period last year. 

Everyone’s got an opinion

Brokers are trying to pick up work where they can. One skill set that’s still in demand is prognostication. 

There’s a catch though: It’s usually not a paying gig.

Many brokers provide their clients with a service called broker opinion of values, which become sought after in times of change when a property’s worth is fuzzy. And while it’s pro bono work, it does help keep dealmakers in their client’s minds.

It can also provide something of a window into where the market’s headed. 

Shimon Shkury, CEO of Ariel Property Advisors, said that he ranks the assignments on quality, based on whether an owner is really ready to sell or just sticking a finger up in the air. He said it helps brokers decline assignments that are likely to lead to a dead end.

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“You have to be extremely careful with your time,” he said.

Brokers are also reacting to the slowdown by shifting to where the business is. Partner disputes, deaths, divorces, bankruptcies and the inability to refinance turn people into forced sellers.

And while brokers are used to chasing active buyers, David Schechtman said it’s more important now to find actual buyers.

“In the boom times, all you need to do is get a good listing or assignment because there’s ample money that will follow it,” said Schechtman, of Meridian Capital Group. “In lean times, a strong buyer should be taken by the hand and physically brought around the city to opportunities, because they are scarcer than the sellers.”


For seasoned brokers, a slowdown can be a forced opportunity for reinvention. 

JLL’s Bob Knakal used the downtime during the pandemic to walk every block in Manhattan and catalog every development site. Now he’s taking that info and opening up a development-site showroom for his clients. 

The location of the center is a secret (visitors have to sign a non-disclosure agreement), but people who get the exclusive invite will get a glimpse of its 24-foot-long, 12-foot-wide map with just about any data point on Manhattan development one can imagine. 

“The quality of our information is head and shoulders above anything out there, and we wanted a place to demonstrate that,” explained Knakal, who said the project is two and a half years in the making. He teased it during two well-attended virtual sessions on Twitter Spaces. “Now is a good time because we’re finally ready,” Knakal said.

One of the biggest challenges brokers deal with is the temptation to tell clients what they want to hear.

Up-and-comers or people who work in high-volume shops often fall into this trap. They overpromise what they can get for the property in the hopes that the client will adjust their expectations when there’s an offer on the table.

Ackman-Ziff’s Andrew Sasson said that’s a misguided approach that could cause brokers to waste time on dead-end jobs or worse, lose credibility with sellers.

A broker is better off being clear-eyed about where the market is — not where they hope it is — and communicating that to clients. 

“You’ve got to be a psychiatrist for some guys,” he said.