If you’re a sales broker on Manhattan’s Upper East or West Side, get out. Go to the Financial District, or to Chelsea, or to Hell’s Kitchen. There, you’ll find a lesser volume of sales, but that volume is spread among a much lower number of brokers based in those neighborhoods. Thus, theoretically at least, you’ll encounter less competition and garner greater commissions.
In an analysis of the number of brokers per neighborhood versus the number of sales per neighborhood, The Real Deal discovered that smaller neighborhoods, ones that only a decade or so ago were overlooked by even savvy sales brokers, present a better opportunity for closing deals than do the larger ones, the ones that traditionally — and today — host the greatest number of Manhattan sales annually.
The numbers of brokers per neighborhood were culled from the Web sites of the 12 biggest brokerages, and were based on the numbers of brokers listed at a firm’s offices; appraisal firm Miller Samuel provided The Real Deal the number of sales per neighborhood for 2001 through 2005 (go to map and charts).
Of course, brokers don’t always broker just in the neighborhoods surrounding their offices. And the larger neighborhoods, like the Upper West Side, simply have more co-ops, condos, and townhouses for sale than smaller neighborhoods.
The study doesn’t include agents at smaller firms. But the proportions of brokers to sales still holds — especially in Manhattan, where around 10,000 sales close every year, on an island with nearly 28,000 licensed brokers and salespeople as of December. The proportions, too, are especially relevant in a time of dwindling sales volume; the number of apartment sales in Manhattan dropped 21.2 percent from the third to the fourth quarter of 2005, according to Miller Samuel.
It can be simple arithmetic, then, in determining where it’s best to be a broker.
“We have all these new brokers coming on and we have about 10,000 sales a year,” said Paul Purcell, a longtime Manhattan broker who became president of Douglas Elliman in 2001 and later co-founded the real estate consultancy Braddock + Purcell. “That’s not that many sales for everyone.”
Deals done on the side(s)
Far more homes are sold every year on the Upper West Side and the Upper East Side than in any other neighborhoods in Manhattan. (For the analysis, The Real Deal considered smaller neighborhoods like Carnegie Hill, Yorkville, Manhattan Valley, and the Lincoln Square area as part of either the Upper West or East Sides.)
In 2005, the Upper East Side, with 1,947 closed deals, accounted for one-fourth of all home sales in Manhattan, according to Miller Samuel.
A good sign for brokers there, right? Not really. A little more than 1,400 brokers among the city’s 12 biggest firms are based out of offices on the Upper East Side, long the headquarters location for many of the city’s biggest firms. Proportionally, the 12 biggest firms recorded 1.39 sales per broker in 2005.
For the Upper West Side, with 736 brokers and 1,536 sales in 2005, the sales-per-broker proportion was 2.08, slightly better than the Upper East Side. But move south a couple of miles, and the numbers look much better.
If a broker wants to get rich (relatively) quick through selling Manhattan real estate, Chelsea may be the neighborhood: Brokers at the biggest firms could have, theoretically, done 5.45 sales each in 2005, based on the number of sales closed in Chelsea last year versus the number of brokers based there among the largest firms. In the Financial District, brokers at the biggest firms could have done 2.4 deals each; in the Murray Hill, Kips Bay, and Gramercy Park area, 2.19; and in Midtown West, including Hell’s Kitchen, 2.23.
These proportions held true before 2005, too. More than 2,100 deals closed on the Upper East Side in 2004, according to Miller Samuel, and nearly 1,700 on the Upper West Side — again, deal amounts well ahead of the rest of Manhattan. In the Financial District, for instance, 64 deals closed, and, in Greenwich Village, 576. Even if Manhattan had fewer brokers in 2004 than in 2005 — and it did — the proportions would be similar: More deals per broker were recorded outside the Upper West and East Sides.
This may help explain the proliferation in brokerage branch offices around Manhattan in the last 10 years.
Chasing sales with new offices
While many firms have expanded or relocated their offices in the last three years, those decisions aren’t necessarily based on where the most sales are happening. Some firms are too small to fret about sales demographics and go where the retail rent is cheapest. Others are so large that branding and other factors shape those decisions. Some simply don’t expand.
“Most real estate companies have only one office,” said Dottie Herman, president of brokerage giant Prudential Douglas Elliman. “And I think real estate companies that have only one office will open where they have the most influence or the most contacts.”
Brokerage offices in neighborhood storefronts are a recent phenomenon for Manhattan. Until the mid-1990s, brokerages generally based all brokers out of their headquarters, many of which were on the Upper East Side (see sidebar). Gradually, as Downtown coalesced into more residential and safer neighborhoods like Tribeca, Soho, and the East Village, the bigger brokerages expanded into satellite offices, some even paying for storefront spreads to capture walk-in traffic and to market a brokerage’s brand to the emerging neighborhoods.
Recently, this expansion that started with toeholds in Downtown has turned Uptown. Halstead Property, Warburg Realty Partnership, Prudential Douglas Elliman, and the Corcoran Group have all opened Harlem offices since late 2004.
“I don’t think we measured the business so much as we went with instinct,” Purcell, the former Elliman president, said of the expansion strategy during his tenure at the firm, which ended before the new Harlem office opened. “We saw the market emerging and we knew we were doing more business, so we would put the office in the location. It gave you tremendous marketing.”
But it could also put you at risk, Purcell says. If the housing market or the economy went south, brokerages could be left with leases for unprofitable offices, leases that might be difficult to unload on landlords or on other tenants.
Chasing sales by neighborhood, always trying to divine the next hot spot in Manhattan, carries as much potential risk as reward, then. In a healthy housing market, however, Manhattan may not have a neighborhood where a new office couldn’t lead to sales for brokers there.
It’s just that some neighborhoods may generate more sales than others for brokers — like Chelsea, relative to market leader the Upper East Side.
The Corcoran Group, one of the pioneers along with Halstead Property, Citi Habitats, and a handful of other firms in opening satellite offices, plans to open its newest office in Chelsea, probably by mid-April.
It’s not that Corcoran has suddenly discovered the neighborhood’s sales potential, says Tresa Hall, Corcoran’s director of sales. Hall, in fact, says “it’s becoming increasingly clear that it’s possible to do sales from anywhere,” but her advice for newer brokers on where to begin hearkens back to the trade’s oldest adage.
“I would recommend,” she said, “that they start in the neighborhood they live in.”
Softer living, harder selling on the Upper East Side
The Upper East Side is command central for sales brokering in New York City.
More deals close in that wide, long swath of Manhattan annually than in any other area of the city. In each year from 2001 through 2005, the Upper East Side, from roughly 59th Street to 96th Street accounted for at least one-fourth of all apartment sales closed in Manhattan, according to appraisal firm Miller Samuel. In 2003, that share of sales jumped as high as 27 percent, with as many as 2,393 sales closed on the Upper East Side out of 8,802 that year for all of Manhattan.
Perhaps the biggest reason the neighborhood can do this is the sheer amount of property for sale there, particularly coveted co-ops and townhouses. The Upper East Side has 135,015 total housing units, according to 2002 numbers from the Furman Center for Real Estate and Urban Policy at New York University, more than any other area of New York City. Of those units, at least one-third are owner-occupied, making the Upper East Side a place where people go to buy — and generally only look to buy if they have the money.
But it’s not exactly broker heaven. The Upper East Side is very competitive — even by Manhattan standards.
Part of that is because the neighborhood has far more brokers and real estate agents — at least 1,403 — than any other neighborhood in Manhattan, according to an analysis by The Real Deal of the city’s 12 biggest brokerages. (Midtown East, from 42nd Street to 59th Street, east of Sixth Avenue, ran a distant second with 1,134 brokers.) Spread those copious sales around, then, among this large amount of brokers, and the proportion of sales for each broker every year on the Upper East Side dwindles. In 2005, it would’ve, proportionally, been just over one deal for every broker and agent based there.
This isn’t a problem, of course, for the more experienced brokers with track records and established client rosters. It may be harder work for less experienced brokers, who might be better off hunting sales in other Manhattan neighborhoods (see main story).
“You can absolutely sell real estate any place,” said Peter Schwartz, a senior vice president with Prudential Douglas Elliman who’s done several luxury deals on the Upper East Side. “It’s easier, I think, if you concentrate on the Upper East Side because of the intensity of the market there.”
Schwartz, a broker since 1991, helped close about 30 deals in 2005. He said several were actually outside of the Upper East Side, some down in Greenwich Village, others as far south as the Financial District.