Leading women predict future of the market

Real Estate Weekly, June 25, 1997 by Louise Matthews

To highlight a few of today's changes and to look ahead, I've asked three prominent AREW members to share their insights in their respective areas of expertise.

JoAnne Kennedy, president of Coldwell Banker Hunt Kennedy East, tackles the question of "What's Ahead for the Residential Real Estate Market in NYC and the Residential Brokerage Community."

"Summer signs point to a continuing shortage of rental properties in Manhattan. As a result, there is continued pressure on prices of available units, a great incentive for developers to commence new projects and to rehabilitate existing stock in older, less desirable neighborhoods, where prices are still low in comparison. However, several factors could have an immediate impact on availability and therefore prices. These factors include:

* An increase in interest rates. Higher mortgage rates coupled with higher prices would create an immediate slowdown in activity. Most industry forecasters, however, are not anticipating significant increases in rates.

* Enactment of a capital gains tax reduction. If Republicans and Democrats get together on this topic, our market would open up. My rough guess is that at least two percent of coop and condo owners would list their properties for sale, which would mean approximately 4,000 new units coming on the market.

* Stock market decline. Not that one is anticipated, but a major fall in the Dew Jones would send quivers to the local real estate market.

After two big, very profitable years in a row, larger brokerage firms are expanding through acquisitions and by opening new offices. Small companies are suffering the most. The high cost of technology - as well as advertising and marketing properties today - is making it harder and harder for little firms to compete.

The trend is definitely toward consolidation. At Coldwell Banker Hunt Kennedy East, the transition from a medium-size, one-office company (the former Hunt Kennedy, Inc.) to a multi-office, fast-growing, national name-brand firm has been a successful solution for staying ahead of industry trends and gaining market share. There is no question that the consumer is 'brand' driven, even in Manhattan, where the saying used to be: "The nationals will never make it in this marketplace."

The trend is also towards 'relationship' business transactions. A consumer satisfied with one company's service wants that company to handle not only their next transaction, but also other real estate-related transactions such as: getting the mortgage, helping with finding office space, assistance in buying a country house and buying a condo in Florida for their parents.

A related trend is found in the number of transactions top agents are completing. More and more real estate brokers are acting as small businesses within their companies by marketing themselves, hiring assistants, and doubling productions. The historical formula of 80 percent of the business being done by 20 percent of the brokers is heading towards a 90 percent to 10 percent national average."

Forces Driving Our Resurgence

Deborah Beck, executive vice president of the Real Estate Board of New York (REBNY) says:

"New York is in the midst of a vigorous recovery from its recent recession. Some of these changes have been driven by the Real Estate Board of New York. For example, the Board convinced the state to abolish the 10 percent capital gains tax on transfers with a consideration of $1 million or more. That success has stimulated transfers and the reinvestment in property that typically accompanies a sale. As a result of these building renovations, more New Yorkers have been put to work, and government is deriving added revenue from sales, payroll and other levies.

"To heal ailing portions of Downtown's office market, the Real Estate Board helped to design and win passage of the Lower Manhattan Plan. This program's lease signing incentives, residential conversion benefits, energy discounts and other features have already attracted and retained tenants for the financial district.

"The creation of REBNY's Residential Brokerage Division approximately three years ago has made it possible for this vital segment of our industry to serve the flourishing Manhattan housing market more effectively. The division's accomplishments include issuing an amended Code of Ethics that enhances business practices, securing a "safe harbor" from Unincorporated Business Tax liability for most licensees, publishing monthly and annual cooperative and condominium sales reports that help buyers and sellers arrive at realistic apartment prices, and preparing a uniform purchase application form to facilitate reviews of prospective purchasers.

"Looking ahead, we expect Manhattan's residential sales and rental markets to remain very strong for to foreseeable future. Likewise, the Midtown office sector should continue to flourish, while Downtown benefits from residential conversions that take obsolete commercial properties out of that inventory and produce a 24-hour mixed residential-business district.