Commercial real estate brokers need to transact the way a shark needs to swim. So what do some of the city’s top brokers think of a market that’s come to a virtual halt?
“It feels like the last few weeks of August,” said Meridian Investment Sales’ David Schechtman, referring to the slow time of the year when most dealmakers are relaxing at their summer homes. “And it feels like it’s going to be this way for a while.”
Schechtman and fellow industry heavyweights Bob Knakal of JLL and Marcus & Millichap’s Peter Von der Ahe shared their thoughts on the impact the coronavirus pandemic is having on the city’s commercial sales market in The Real Deal’s TRD Talks session Friday, moderated by reporter Eddie Small.
When it came to the raw numbers, Knakal pointed out that 2020 got off to a slow start even before the virus came into play. The first 10 weeks of the year, he said, put Manhattan on track to finish the year with $20 billion in sales. That would be down 30 percent from last year and down 65 percent from the market peak in 2015.
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“The fact is that the underlying fundamentals in the market have not really been working with us,” he said. “That’s more of a concern I think than anything that could be temporary.”
Von der Ahe said deals that went into contract earlier in the year will close. But the ones that will be affected most by the virus are those that were just getting started hitting the market before the city shut down.
“That’s where the dead spot is in the market,” he said.
He also pointed out that when the economy starts to slow, brokers typically rely on the rent-stabilized multifamily market for activity. But that’s not the case now, following the state’s passage of a tenant-friendly rent law last year.
“Rent-stabilized property typically was a recession hedge,” he explained. “What happened in June is it took away all of the upside.”
The veteran dealmakers also weighed in on whether their segment of the industry would see significant layoffs now that transaction volume has dried up.
Knakal cited projections from the broker-coaching consultancy Massimo Group, which said the total of 83,000 commercial brokers nationwide could dwindle to as low as 60,000.
“Typically when you have a situation where volume drops, normally that process weeds out mediocre brokers or brokers who are not very active,” he said.
Marcus & Millichap on Thursday hosted a virtual jobs seminar, and is actively recruiting in this market.
Von der Ahe said he thought the industry, particularly in New York City, where transaction volumes have been declining since 2015, was already lean.
“Our industry has been thinned out a lot over the past several years,” he said. “So it’s not like we’re coming into what happened with the coronavirus very bloated.”
Schechtman opined that younger brokers who were just starting out and have the option to move to other industries would be affected most. But he said it would be beneficial for them to stick it out.
“I would encourage those people to stay, because this learning experience and weathering it is going to really set them up for success when we have an ascending market,” he said.
Contact Rich Bockmann at rb@therealdeal.com or 908-415-5229