Brokers Blog

Commercial real estate brokers have been downsizing their costly marketing strategies to cope with lower commissions from sales, according to interviews with commercial and residential real estate agents and brokers.

In Oregon and Washington, Certified Commercial Investment Members have been cutting down the number of their expensive social events like golf tournaments and hotel lunch programs and relying on lower-cost marketing strategies such as online networking, real estate blogging, classified ads listing and meeting people at events organized by other people.

According to Linda McClellan, head of the Clark County Association of Realtors in Washington State, the struggles of the real estate selling industry are shown in the sharp drops in realtor association membership across the country.

Her 88-year-old association, for instance, has already lost 800 members since 2005, when 2,200 real estate professionals were enthusiastically earnings loads of money from selling and buying properties. This year, McClellan expects about 200 more members to cancel their membership.

CCIM, meanwhile, expects its average of 300 members to drop this year due to continued uncertainties in the residential and commercial property subsectors. Association leaders feel that commercial real estate brokers are being swayed by the rising trend of finally retiring from work or retooling for other jobs or businesses.

To cope with declining membership, associations have been eliminating the perks they previously offered to their members. When holding retreats or other big events, they approach companies for sponsorship.

Linda Fisher, president of the Portland chapter of Commercial Real Estate Women, said she has been working harder to solicit sponsorship from companies. During the boom, most companies can easily give $2,000 to be the sole sponsor of an event. These days, Fisher said, the most she can collect from one firm is $500.

According to Anita Rifberg, president of the Southwest Washington-Oregon chapter of CCIM, real estate brokers today need to exert more effort to find networking opportunities in affordable ways. They also need to update themselves continually about changes in the market. Once they fall into complacency, it would be very difficult to get back, reconnect with movers in the business sector and start again.

According to many real estate professionals, it would still benefit commercial real estate brokers to stay as members of professional associations because these groups exercise greater power in business communities, provide networking opportunities, support advantageous legislation and conduct continuing education in the real estate business.

Commercial real estate brokers are stepping up their efforts to negotiate sales as they take advantage of dropping apartment prices in Manhattan.

According to reports released by Prudential Douglas Elliman and Miller Samuel Inc., the median sales price for previously owned apartments in Manhattan have dropped to $750,000 in the third quarter, a decrease of 8 percent from the median price in the same quarter last year.

The third quarter drop rate however is lower than the 26-percent drop in the second quarter compared to $725,000, which was the median sale price in the second quarter last year. Compared to the second quarter this year, the median sale price in the third quarter increased by 3.4 percent.

The median price for a new apartment in a newly-constructed apartment building is $1.2 million, a price basically unchanged. But this price level, according to commercial brokers, does not reflect the true state of the residential market because few are buying at that price level. They said that it can take a couple of years to close transactions above $1 million.

As apartment prices fall down, the number of sales transactions closed by commercial real estate brokers goes up. In the third quarter, sales transactions rose by 46 percent from the second quarter to 2,230 deals. The number of sales deal though was still lower by 16 percent compared to sales in the third quarter last year.

Pamela Liebman, chief executive of The Corcoran Group, said buyers now are choosing from a lot of great deals and they are seeing a lot of value from the multifamily properties available for sale.

In addition, sellers are now more willing to reduce their prices, according to brokers at Brown Harris Stevens. Apartment sellers now are accepting 95 percent of their asking prices, a decrease from the 97 percent they were willing to accept in the past.

Brokers and real estate analysts however admit that more prospective buyers are taking their time in making their purchase decisions because of the high inventory of lower-priced apartments for sale.

Prospective buyers also know that the lower prices will stay unchanged for a while because of the still high level of unemployment and the difficulty of obtaining large mortgage loans.

According to commercial real estate brokers, high-end apartments remain the most difficult to sell. They said that no broker has sold a co-op apartment priced above $30 million in the third quarter.