Most businesses grow from the ground up, and that’s increasingly the case for Manhattan residential real estate brokerages, which have come down from their traditional upper-floor perches to swell the ranks of city storefronts. The migration to sidewalk-level operations, pioneered by Manhattan maven Barbara Corcoran, seems to have caught on.
Costs may be higher, with storefront prices two to 10 times higher than space off the street, but real estate brokerages must also consider the importance of visibility and getting a competitive edge in a competitive market.
It’s worked for Citi Habitats, one of Manhattan’s largest residential brokerages, which now has 14 street-level offices. It also has a solid, established profile, says chief operating officer Gary Malin.
“We look at the location and say, ‘Is this a location that Citi Habitats should be in?'” he says. “If the answer is ‘Yes,’ then we look at the size of the office and the layout of the space and determine if we can put enough agents in there comfortably to get a return on investment that makes financial sense.”
In this market, brokers snare business however they can, he adds.
“We always felt this was a good business decision for us,” Malin says. “We felt that, despite the increased cost, the increased foot traffic and exposure would be in our favor.”
In July 2002, Citi Habitats expanded from seven to 18 offices in a short period of time, and was able to take advantage of slumping retail rents in a poor economy.
“There were such prime retail opportunities for us in neighborhoods we hadn’t been in before,” Malin says.
Retail rents climbed steadily since then, though many brokerages are still opting to move to the ground floor. Besides attracting walk-in traffic, the storefronts act as working billboards and allow brokerages to create an obvious presence in a neighborhood.
“Part of it is advertising and part of it is PR, so you can’t just write it off as a rental expense,” says Kurt Weyrauch, executive vice president and managing director of sales at Brown Harris Stevens.
The company has four storefront offices, including 1930 Broadway, scheduled to open this summer. Weyrauch oversees the firm’s Tribeca office, which opened in January. He says about six customers walk in per week on average, attracted by huge street displays. It may not seem like a lot, but deals are being done, he says.
“A month or so ago, we had somebody walk in from the neighborhood who ended up listing their apartment with us for $2.8 million,” Weyrauch says. “We ended up selling them a house in Riverdale for $3.2 million, so that’s $6 million in deals off one walk-in, and that’s pretty sweet.”
Storefront offices cost more than upper-level ones, and are also smaller and thus more sparsely staffed. Agents get more customers who are just beginning their apartment hunts, as well as the many window shoppers who have the New York real estate bug.
Prudential Douglas Elliman has three storefront offices in Manhattan, including a recently opened branch in Harlem. About 60 percent of business at their established retail office at 980 Madison Avenue comes from walk-in traffic, says Steven James, senior executive vice president and director of East Side sales. “We get such expensive traffic coming into that office,” he says, “but I wouldn’t compare it to our other offices.”
Elliman has three retail offices in Brooklyn, including a new one in Brooklyn Heights. There, brokerages entering the market have no qualms about taking retail space, and consider it essential to compete with the many neighborhood brokerages that dot the borough streets, says Fillmore Real Estate president and chief executive officer John Reinhardt. His firm has 20 retail offices, all in Brooklyn.
“Around the country, I’d say 95 percent of the firms have retail space,” he says. “It’s just the way everybody does real estate in every place I’ve seen.”
However, the firm is currently looking for space in Manhattan, though the office will probably be on an upper floor, saving on costs and screening out a less interested walk-in clientele.
Still, not every company is placing a priority on retail space. Daren Hornig, president and chief executive officer of Dwelling Quest, says his company recently opened two storefront offices in Harlem and Brooklyn, but is focusing on technology as a growth strategy.
“With the prevalence of the Internet and people looking at it, I don’t think retail is as necessary,” he says. “The Internet is where we’re getting most of our leads, our activity and our branding.”