With the rental apartment market flagging, landlords are being forced to change the way they handle their rental listings, and brokers accustomed to “exclusives” may be in for a rude awakening.
Where landlords once relied predominantly on exclusive listings, giving their apartments to just one broker or firm to rent, they are now offering the units to multiple brokerages, and pursuing other means of exposure to attract scarce renters.
The shift follows a similar change on the new development front, where some developers are now forgoing exclusive sales and marketing teams and instead bringing on sundry brokerages to compete with one another.
The move away from exclusive rental agents could have major ramifications for the way apartment leasing is handled at a time when an increasing number of brokers are looking to take on rentals because the sales market is so slow.
“In this market, landlords are getting creative,” said Luigi Rosabianca, principal attorney and founder of the real estate law firm Rosabianca & Associates, which includes landlords among its clients. He noted that landlords’ alternatives to traditional exclusive brokerages include open listings, listings with multiple brokerage firms and online listings at sites such as Craigslist.
Marc Lewis, president of Century 21 New York Metro, said that while landlords have also shifted their thinking about how to deal with rentals in past downturns, this recession could have even more far-reaching results.
“Every time you go through one of your cycles where you have a lot of vacancies, landlords start to open their ears to someone else that might be able to help them more,” he said. “It’s happened before, in 1990, 2001, 1987 and 1976, but they were sort of just blips that lasted a few months.
“Nobody knows what’s going to happen with this downturn,” he said.
Landlords may never again see a reason to return to the exclusive listings system, especially since the Internet allows renters to use multiple brokers to find an apartment.
Lewis said that technology has allowed landlords to move toward what he calls “semi-exclusive” listings, rather than exclusive listings, and that the market downturn is reinforcing that trend.
“The new form of exclusive is what I call a ‘semi-exclusive,’ where you have a very good relationship with the landlord, but they’re also dealing with two or three other companies,” he said.
Kathryn Higgins, an associate broker with DJK Residential, agreed that the days of predominantly exclusive listings in the New York City rental world may be numbered.
She said, “I haven’t seen brokerages back down from demanding exclusives yet,” but she added, “I think what happens in the summer will determine it. You might see the brokerages open it up as a quasi free-for-all.”
Higgins continued, “I hate when any landlord goes around me, and I’m defending the brokers, too.” However, she noted, “to say, ‘It’s us or no one,’ [brokers] are going to lose business.”
Jordan Platt — fourth-generation scion of the Kalikows, a New York City real estate dynasty, and vice president of operations at Kaled Management Corp., which owns and manages 2,000 apartments in Queens, Manhattan and Brooklyn — said that for decades, his family had the superintendents of their buildings handle rentals through word-of-mouth, with assistance from a husband-and-wife team of brokers in Queens.
But about two years ago, Kaled hired another broker with a large Russian client base to assist in Queens. In recent weeks, in response to the large number of vacancies Kaled is seeing in its buildings in Flushing, the firm sought out a broker who speaks Chinese and Korean to tap into the area’s large Asian market.
Kaled approached Prudential Douglas Elliman, which has an office in Queens, but the brokerage wanted an exclusive arrangement, he said.
It was the first time Kaled had negotiated with a major brokerage firm.
“The major brokerage companies don’t want to take listings without an exclusive, so they almost want to lock you into it,” said Platt. “They say, ‘We’ll take your listing, but if you want it to go on the Douglas Elliman Web site, or the Corcoran Web site, or the MLS, we need to know it’s ours.”
Kaled would not agree to an exclusive, but the deal was completed nonetheless.
“I said, ‘Right now, today, I’ll give you 15 apartments to rent, but we’re not going to sign an exclusive, and I only want two agents, not your entire community,'” said Platt.
“But we assured them that, effectively, it’s like having an exclusive with us. So they agreed.”
Other brokers said some landlords are distributing their listings to a broader base of brokers.
Kelly Yuspeh, a sales associate with Bellmarc Realty, said she is working with one landlord of a rental building who has refused to give exclusives.
“The owner believes he has a greater chance of renting than through just one agent,” she said. “More agents, more exposure.”
Lewis, however, said he doesn’t believe that many Manhattan landlords are making the move toward completely open listings.
“They’re not dealing with 25 companies, because there are so many apartments vacant, they would have to provide keys for all of them, and it becomes a big security problem to give out all those keys,” he said.
For some brokers, not having to hunt down exclusives may be one less thing to worry about in a down market.
Yuspeh’s colleague at Bellmarc, senior associate broker Susan Simon, said she used to have to pursue listings from landlords actively, but that has changed.
“Many of the big companies that would work with brokers only if we called them are now sending us daily listings,” she said. “I recently did a rental with Glenwood, and they were delightful to work with.”
Higgins said she is seeing landlords so eager for exposure that they’re paying for advertising beyond what the brokerages provide.
“They’re not just leaving it to the companies they’ve hired to advertise,” she said. “They have to make a real effort until they get to that magic occupancy number, so they’re going out and running their own ads.”
Thus far, Higgins said she hadn’t seen many landlords circumvent their brokers to deal directly with potential renters and save the commission price.
But she said that could begin to occur if the anticipated summer peak fails to materialize.
“They’re still honoring their deals with brokers, but who knows?” she said. “If it gets more desperate, I don’t know what they’re going to do. However, personally, I’m not a pessimist, and I think it will be a good summer.”