In any marketplace, the laws of supply and demand determine how that market functions. Commercial real estate sales is no different.
In the New York City real estate market, those of us in the sales discipline are very fortunate that it is almost always the case that demand greatly exceeds supply. In fact, since 1984, when I first started brokering investment property sales in the city, demand has exceeded supply in every year except one. That year was 1992 when the Resolution Trust Corporation was dumping properties from failed banks left and right and there was not much equity around in those days. In every other year, demand has completely eclipsed supply and has really spoiled those of us working in the New York City market.
Demand drivers change over time but demand keeps coming in wave after wave. In the 2005 to 2007 bubble inflating years, institutional capital inflated the bubble very quickly. By late 2007 when we saw that the credit crisis was tangibly on the horizon, this institutional capital evaporated leaving a void which was swiftly filled by high net worth individuals and old-line families who were muted by the institutions in the prior years. Then foreign buyers increased their prominence in the market and the institutional capital reemerged creating a market in which demand is dwarfing supply.
For this reason, controlling product, while always a critical component of the property sales business, is currently more important than ever. Properties that are reasonably priced, even if pricing is professionally aggressive, will find dozens of buyers who will make offers on those properties. The brokers who are able to control the most product are the ones who are closing the most transactions today.
In the perpetual supply / demand relationship, supply must be the focus for salespeople who are striving for consistent performance year in and year out. This is particularly true because another 1992 is not likely in the foreseeable future. If it didn't occur in 2009, I can't imagine what market conditions would be necessary to have it happen again. So, we are indeed spoiled in New York but must continue to take advantage of the conditions presented to us.
By: Bob Knakal
Chairman | Massey Knakal Realty Services
Mr. Knakal is the chairman of Massey Knakal Realty Services and has personally brokered the sale of approximately 1,500 properties in New York City having a market value in excess of $10 billion.
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