Regardless of size and market share, New York real estate firms list advertising as the largest component of their operating expenses, and costs are rising.
Barry Dulany, co-owner of Harborview Realty, a boutique firm of 15 agents based in Brooklyn Heights, said advertising consumes as much as 90 percent of her firm’s overhead costs.
David Michonski, chairman of Coldwell Banker Hunt Kennedy, and Barbara Fox, president of Fox Residential Group, said that advertising remains the largest chunk of their operating costs – even more than their high office rents.
But Michonski, head of one of Manhattan’s larger firms, thinks the dynamics are better for bigger firms than for small firms. He compared the costs of a large firm advertising 50 of its 800 listings with a small firm advertising all of its 10 listings, both in the Sunday edition of The New York Times.
“As a larger firm, you’ll spend a smaller percentage of your money on ads than a smaller firm,” he said. “If you’re a small firm, you spend a lot more money on ads as a percentage of your company dollars to give the appearance of being bigger.”
Larger firms are able to distribute advertising costs over more agents, Michonski added.
But the cost-benefit calculus of advertising dollars can be looked at differently, according to Fox, whose boutique agency has 40 brokers.
“Because the large firms have so many brokers, we advertise more per listing per broker than the bigger firms,” she said.
Plus, large firms only devote a certain amount of money to advertising regardless of how many properties are being sold. That’s different from her own firm, where they push the product until it is sold, Fox claims. “Each individual exclusive listing that gets advertised here is advertised a lot more than in the large firms because those firms have so many,” she said.
Douglas Wagner, president of Benjamin James Associates, a mid-size firm with around 85 agents, said the Internet initially allowed small firms to maximize their advertising budgets, but the increasing cost of Internet ads, particularly at the heavily used Times site, has put an additional squeeze on small brokerages.