Property Grunt

Monday, June 18, 2007

The first of many: Predictions of the industry.

Did you see this onCurbed?

Before we get to today's query, let us say that we love real estate brokers. They facilitate our buying and selling, our laughter and tears. But apparently—and this is just a rumor going around—there are some bad seeds in the group. And one Curbed reader has had just about enough. He writes,

I recently had a very bad experience with a horrible brokerage firm in NYC. I'm feeling kind of vengeful (they fully deserve it) and I want to know what I can do. Is there some sort of "watch list" that I can put them on, or some sort of community board that I can add them to so other people don't get screwed?

To the comments with your most civilized, responsible discourse, please

Douchebag brokers are nothing new but this Curbed question has touched upon something that I have been thinking about for quite sometime which is the next phase of the rental brokerage industry which is that brokerages that deal exclusively with rentals will begin to downsize.

Now I have heard no rumors, nor news nor chatter about my prediction. It is something that I have contemplated for quite awhile and looking at market conditions I think it is plausible.

Here are the facts.

Rental inventory is at a historic low.

There are plenty of clients out there but there are not enough decent apartments for everyone. Everyone is hustling to find a place and I will not surprised that people consider this the most horrible of rental seasons.

New York City is too f**king expensive.

To rent an apartment in the city requires a ton of money up front which amounts to a years tuition at medical school. Consumers are going to mine every connection, they are going to go to every party in the city and talk apartments, see who has a sublet, see who is going to be leaving the country. They are going to put on their Sunday best and portray themselves as the best roommate or best tenant. They are going to do everything they can to get that apartment at a lower cost. And if it means screwing the broker, so be it.

Rental Broker Rage
I am very aware that rental brokers work very hard for their money. For every deal they close, there were probably 10 deals that fell apart in their hands. It has become such a predatory business where even the most successful rental agent has to keep their guard up.

But how do you sell a product that does not exist? You can't. There are not enough quality apartments out there for all the brokers to survive on.

As far as I am concerned, the cost of running a rental brokerage is akin to running a restaurant. It is a high pressure game where you have to make deals while battling with expenses like rent, office supplies and internet access. Agents are not cheap, especially if they are not producing. I suspect that the major players are going to look at their numbers and see a huge disparity between their profits and expenses.

I will not be surprised if the rental giants of Manhattan proceed to cut away the fat and close the doors on their least profitable branches and begin to consolidate their best agents while tossing out the flotsam.

I realize this is a very harsh assessment but rental brokerage is not a charity.