Juggling act: Brokers face higher expectations as new dev market sputters
“It’s not just about negotiating a fee. It’s about really fundamentally making sure our interests are aligned.”
When Douglaston Development began vetting teams to market the company’s Fort Greene condominium project, the developer opted to stay local. Very local. To sell 75 Greene Avenue — which includes 22 units and four townhouses — Douglaston wanted brokers already well-versed in the neighborhood who could help shape a project that largely catered to young families in the area.
The firm interviewed four of five teams and settled on MNS, said Ben Levine, Douglaston’s executive vice president of finance and acquisitions. It helped that the developer had previously worked with MNS, but the firm also sought out its neighborhood expertise.
“We dug deep with them,” he said. “We wanted to be confident that they understand the buyer but also things like the finishes and how to navigate the limited scope of amenities for a small-scale project.”
As the new development sales slump lingers on and sales cycles get longer, the developers are facing more pressure from their lenders and investors to sell condo product. With more competition among agents and firms vying for deals, developers have upped expectations, seeking full-service consulting teams that go far beyond the final sales process.
“It’s not just about negotiating a fee,” Levine said. “It’s about really about fundamentally making sure our interests are aligned.”
The added caution isn’t unfounded: Sales in Manhattan have been steadily declining. In the first quarter this year, number of sales closed in Manhattan dipped 2.7 percent versus a year earlier while the median sales price fell 0.2 percent, according to Douglas Elliman. Among new development properties, sales volume tumbled 39.4 percent even as the median price ticked up 3.4 percent. The combination of slowing sales and rising inventory has cooled the pace of the market, which has been characterized by more incentives and price cuts.
The slowdown has presented an opportunity for full-service specialists.
While brokerages like the Corcoran Group and Compass also consult with developers, the Marketing Directors works exclusively with new development projects. That singular focus — unlike brokerages that also work on resales and older rental buildings — is what the firm views as its competitive edge. “Anyone who comes in the door thinks we are the developer, not a third party,” said Jacqueline Urgo, the firm’s vice president.
“Developers today are more risk averse than they’ve ever been,” she added. “They’re looking for an insurance policy; that’s how developers think of us.”
As development cycles have gotten longer, it’s more important to make sure a client is a good fit, said Ryan Schleis, vice president of research and analytics at Corcoran Sunshine, the new development arm of the Corcoran Group.
“This is like a marriage,” he said. “Going to the pitch is like the first date, trying to figure out whether we are willing to be in this long-term relationship together.”
While Corcoran Sunshine leans on its existing relationships with some of the city’s top developers, it still has “go through the motions” of pitching — because lenders are also weighing in. “Even in this environment, you still have to have a positive outlook on a project and what it can achieve,” Schleis said. “But financiers want to know why we’re even building this building in the first place.”
These days, developer clients are looking for a partnership that spans the full cycle, said Louis Adler, co-founder of Real New York. “Our goal is to be the dominant player in a said zip code,” he said.
The firm is also making a bigger push to generate buyer leads — through platforms like StreetEasy as well as social media targeting. Part of the “white glove service” means not only selling the units but lining up buyers, Adler said.
“There’s nothing more attractive to a developer than saying we have 100 clients lined up for the price point you’re looking to hit when you’re ready to go live,” he said. “Some brokers don’t focus as much on the buy side.”
To land a big fish, Adler said the company is willing to get aggressive with its commission rate. “Spending has certainly increased, but I think they’re necessary costs,” he said. “Some projects may not be super fruitful but you do them to maintain a relationship.”
The right approach also, of course, varies by project. High-profile, high-end developments — the likes of 15 Central Park West or 432 Park Avenue — lend themselves to star brokers and big names. “You need those very kind of prominent brokers who are always networking and know the people who are potentially going to buy these units,” Douglaston’s Levine said. “You need people who understand that buyer base because it’s such a small world there.”
On the other hand, DA Development Group, whose Manhattan projects have pricing in the $1-3 million range, looks for the top broker in a given submarket. The firm gets five to 10 top brokers pitching themselves every month, said co-founder David Shenfeld. “Generally speaking, a lot of brokers will tell you what they want to hear,” he added. “A lot of times they can blend together, saying the same thing with different words.”
Because buyers are armed with so much information themselves, developers need a marketing team that can do more than “show off the countertops,” Shenfeld said. Others echoed a similar sentiment — and noted that these relationships require difficult conversations about pricing and financing.
Because land prices are so high, projects are increasingly difficult to pencil out. Brokers may sometimes say a particular price point is achievable simply because they want to lock down a deal, according to Levine.
“We’re always open to new partners and brokers,” he said. “But the most important thing is when everyone comes to the table, you have an honest and realistic conversation.”