- The market doesn't "feel like a downturn," said the broker/developer of the New York City economy.
- Most of the U.S. housing market is domestic-driven, so the stock market might cause hesitation.
- Running both a brokerage and development company requires unique listening skills.
- The increase in signed contracts indicates the market is reviving.
As a third-generation real estate mogul, Will Zeckendorf knows the ins and outs of one of the most dynamic real estate markets in the nation — if not the world.
He sat down with publisher Brad Inman at the inaugural Global Connect event in New York to share his views on the city’s market with attendees.
A family affair
Will’s grandfather, William Zeckendorf, Sr., and father, William Zeckendorf, Jr., were also in the New York real estate business. Will had a close relationship with his grandfather, who built Roosevelt Field shopping center on Long Island before his passing.
“He took me up to Park West Village just as he was finishing Park West Village — he was a great grandfather,” said Zeckendorf.
Growing up surrounded in real estate and development might have spurred Will’s passion for the Manhattan market.
Is the NYC market in trouble?
With a special focus on high-end sales and development, a space facing continuous price dips over the the last six months or so, Zeckendorf has an optimistic view of the New York City real estate market.
“Nothing here feels to me like a downturn. Rates are low, jobs are being created,” he said. “So I’m asking myself, what drove the last six months?”
Being through four or five market downturns himself, Zeckendorf put a data scientist on the job for 60 days. The results, which revealed a correlation between the S&P indices and apartment prices, didn’t come as a surprise to Zeckendorf, who has been making the association for roughly 20 years.
The drop, analyzed via new signed contracts month-over-month (because closings are too far in the future to be meaningful), shows a timeline match between the S&P drop last September and the drop in new signed contracts on a monthly scale.
“That doesn’t mean pricing isn’t important — pricing is more important than ever,” he said. “The market probably got ahead of itself…But no, I’m not doom and gloom.”
International vs. domestic
Contrary to what you hear about global financial issues, most of our market — New York, Washington, California — is domestic, Zeckendorf says. Stock market volatility makes people step back more than anything.
Inman posed a curious question: Why do we get so crazy about foreign buyers if it’s a small part of the market?
“It’s icing on the cake – it’s what gets written about,” he said. “Fundamentally, everyone in this room knows, 70 percent of your buyers are in the United States.”
Zeckendorf recommends “Watch the S&P, watch job growth, watch rates. That’ll be a much better indication of where the market is going than worrying about Brazil, Russia and China.”
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“Again, in the super luxury segment, that market remains a little slow. That may not change immediately. Nothing is saying to me that this is a repeat of 2001, ’92…” he said.
Being a brokerage: the importance of listening
Zeckendorf’s business is both a development company and a brokerage, and he splits his time roughly between each. Although the time commitment might be even, his leadership role is shifting and unique.
“Development is a top-down business, only about 15 professionals…whereas in Terra Holdings, which has grown to be 3,000 professionals across seven states, it’s very much a listening business,” he said. “I have to listen to the input we get from brokers, staff members, executives and the like.
“It very much requires me to not only change hats, but to change my entire approach. In a business that large, if you’re not listening to feedback from everyone, you’re going to lose touch.”
Zeckendorf also spoke about how the brokerage business has become increasingly competitive — but his optimism continued. Competition forces brokerages to get better, if anything.
While Terra Holdings serves New York City, Miami, Connecticut, New Jersey, the Hamptons and Palm Beach, Zeckendorf Development is strictly Manhattan.
“That’s all Arthur and I have done for 25 years or so. That’s a big enough market. One building at a time,” he said.
How has development changed over the decades?
When Zeckendorf worked with his father, he was building smaller, federally financed apartments driven by HUD (the Department of Housing and Urban Development). When he joined forces with his brother, Arthur, to start their own business in 1992, they began building larger apartments.
“Starting in the mid-90s, Arthur and I felt a need for larger apartments,” Will said. “We’re back to larger apartments, higher ceilings, much more sophisticated mechanicals.”
What used to take 18 months now takes Zeckendorf three years to complete.
“It kind of kicked off an arms race. Every building has to have a restaurant, every building has to have a health club, etc. etc.” Zeckendorf said.
Inman asked: Has post-9/11 reshaped architecture safety requirements?
It’s more about the general design, technologically, Zeckendorf stated. Buildings are more complicated overall.
“Safety regulations, which I completely support, are much more rigorous,” he said. “For 520 Park, I think we started demolition two years ago and we’re just on the ninth floor. It takes a long time — and it’s very expensive.”
2016: What can brokers expect?
“The reason I remain pretty positive is, just look at the job growth continuing in both the U.S. economy and the New York City economy. In all my years in this business, I’ve never seen a supply-induced slow-down,” Will said.
“Demand is the bouncing ball of this industry. And demand, is I believe, this year going to be relatively strong.”
Not only are signed contracts increasing, but economically speaking, jobs and low rates are steady as well.
Zeckendorf is hoping the March boost will continue through 2016.
For agents in New York, now is prime time to present clients with a value opportunity. Prices have backed off for the first time in four to five years.
“I think it gives the brokers good ammunition to get out there and work those clients who missed the opportunity the last go-around,” he said.