Ranking new development firms in a hostile market

New condos have lost their boom-time sheen and are now more troubled than virtually any other sector of the New York market. However, there are still firms out there moving the remaining units.

This month, The Real Deal surveyed the top new development marketing firms, which have their work cut out for them, as buyers who were once signing contracts before a building’s foundation was even poured are now demanding steeper discounts and more concessions.

The survey found that the Corcoran Group and its subsidiary, the Corcoran Sunshine Marketing Group, have marketed more new condos than any other brokerage in the last few years, just as the last time The Real Deal conducted the survey in 2006.

Go to chart: Biggest new development marketers by number of projects

But while Corcoran has maintained its place at the top of the heap, the real success story seems to be Halstead Property Development Marketing, which has snatched away a huge amount of market share from its competitors in the last several years.

In 2006, Halstead ranked number 10 in terms of number of units marketed. This year, the firm has skyrocketed to third place, listing 4,139 new development units in 59 projects between 2007 and 2009.

Go to chart: Biggest new development marketers by number of units

That number represents a massive amount of growth for the firm, which represented only 229 new development units between 2005 and 2007 (the 2006 survey included projects slated for 2007).

Corcoran and new development-focused Corcoran Sunshine together topped the list by a wide margin, marketing 6,661 units in 200 projects between 2007 and 2009, the survey found. Prudential Douglas Elliman Development Marketing Group finished second, with 4,436 units in 77 projects, moving up from third place last time.

The survey looked at new developments that began sales or leasing between 2007 and 2009. Projects were counted for each firm for the year in which it was hired to market the project, even if another firm was later hired to handle the sales or rentals.

With the new development marketing world shrinking — a recent survey found the number of closed sales in new developments dropped a stunning 67 percent in the first quarter of 2009 from the prior-year quarter — many firms are finding they need to evolve to survive. Corcoran Sunshine, for example, is now consulting with lenders on distressed properties all over the country.

Yet even with the diversification, there seems to be hardly any way to escape the pain felt by all new development marketing firms in the city.

Go to chart: Biggest projects for each firm

“Clearly, the new development market has been one of the hardest-hit submarkets because of the financing issues and construction costs,” said Shaun Osher, founder and CEO of Core Development Marketing, 13th on The Real Deal’s list. “It’s definitely a difficult and trying time.”

Still, some firms are doing better than others. Halstead Property, for example, has focused heavily on new developments for the past five years, since Stephen Kliegerman gave up his post as the company’s director of sales for Downtown to focus exclusively on the sector as the firm’s executive director of development marketing.

After a hiring spree three years ago, “developers started to take notice that our developments were beating them for buyers,” Kliegerman said.

Kliegerman said he often looks to brokers in the field for insight.

“We bring actual resale brokers to meetings to get their opinion,” he said. “At some companies, there’s a wall between resale and new development. We don’t have a wall.”

That input helps paint an accurate picture of market conditions and upcoming trends, he said. During the recent boom, for example, many developers in Harlem “were being told that you had to build bigger apartments to attract people to Harlem, when the exact opposite was true,” he said.

Rather, Kliegerman said, because Harlem is a “value market,” units needed to be conservatively sized so that interested buyers could afford them. At the Bridges North development, where Halstead was brought in to help reposition the project as a rental, the developer had been “priced out of the market, even at $600 per square foot,” because the project — originally marketed by Elliman — had two- and three-bedroom apartments.

Kliegerman added that Harlem is a particular area of strength for Halstead.

By contrast, Elliman has nurtured its presence in Long Island City, where it recently took over Arris Lofts from Corcoran Sunshine, said Andrew Gerringer, managing director of the Prudential Douglas Elliman Development Marketing Group.

Elliman also is handling sales at Long Island City developments Crescent Club, the Powerhouse and the L Haus, Gerringer said.

“Long Island City has been a real boon to us,” he said. “That’s what’s been driving a lot of our success to date.”

That’s particularly true now that the high-end market has soured, since the majority of the Long Island City units are less than $1 million, he said.

Elliman is not, however, doing as well in some traditionally blue-chip neighborhoods such as the Upper East Side, where Corcoran Sunshine recently took over former Elliman projects Manhattan House, Miraval Living on 72nd Street and Yorkville’s Georgica.

“We’ve been expanding our market share and taking over properties and repositioning them to meet market demand,” said Kelly Kennedy Mack, president of the Corcoran Sunshine Marketing Group.

Corcoran acquired the Sunshine Group, founded by New York City marketing guru Louise Sunshine, in 2002, and the two merged operations in June 2005. Largely as a result of this marriage, Corcoran now is unrivaled in its dominance in new developments across the city, even in the recession. “We’re really in every area of the city,” Mack said.

But even for Corcoran’s new development teams, selling condos is not easy these days. In response, Mack said, the company has been consulting on distressed properties all over the country and handling sales and marketing for buildings on the West Coast and in South Florida.

“We started expanding more into other areas when the market started to slow down a bit,” Mack said.

The lull was caused by the credit crisis, which makes financing new residential projects very difficult, if not impossible, for developers. Mack estimated that while there were 7,000 sponsor units for sale in Manhattan in 2006 and 9,000 in 2007, only about 800 new condos are expected to come online by the end of 2009.

“Because of the lack of financing to developers in the market, the pipeline has shrunk considerably,” Mack said.

Companies that have managed to do well in relative terms are those that are adapting, said Elan Padeh, CEO of the Developers Group.

“What worked three years ago,” said Padeh, “isn’t necessarily working now.

“You really have to know what buyers are looking for,” he added. “In today’s market, it’s about price point.”

The Developers Group rose from eighth in 2006 to seventh this time around, with 2,569 units. The Brooklyn-based company beat out 25 competitors to become the exclusive sales and marketing agent at the 385-unit development the Edge in Williamsburg.

Other companies dropped on the survey, falling behind their competitors, as they presumably are feeling the pain of the market.

The Marketing Directors, for example, fell from second to sixth place, and Stribling Marketing Associates, which handled sales at the litigation-plagued Plaza, fell from sixth to 10th.

The controversial Shvo Group, which has presided over troubled developments like 20 Pine and Rector Square, fell from seventh to ninth.

With fewer new development projects to sell, many agents who specialize in new development may leave the industry altogether.

“There will be a contraction in the marketplace,” said Kliegerman, who predicts that the pipeline of new developments will not fully recover until 2012 or 2013. “Just like in any business, the strong will survive.”

Others note that marketing the most units isn’t the best barometer of a firm’s success. “We’re not interested in having every project in the city,” Osher said. “Only the ones we can be successful in selling.”