A recent Institute for Policy Studies report offers a decidedly negative view of both the city’s luxury residential market and the homebuyers who support it. The study’s argument that the luxury buildings are populated by faceless corporate entities and international buyers seeking to park their money ignores a larger and exceptionally positive outcome for the city. (Full disclosure: As the principal of a full-service residential and commercial real estate brokerage firm in the Boston market, I represent many real estate owners and developers.)
First, the burgeoning community of luxury condos in Boston is, in economic terms, a net positive for the city — providing significant tax dollars and job opportunities. Contrary to the study’s one-sided viewpoint, luxury development in Boston provides new residential opportunities for those who are looking to move into the city.
In addition, the report seems to view ownership by international buyers as an inherently nefarious undertaking, calling one tower a “classic wealth storage” property. The study’s authors seem to have a decidedly dim view of international real estate transactions — perhaps based on data from other markets such as New York City and Miami, which have experienced an influx of problematic transactions and slow city reaction.
Boston is on the world stage for many respectable reasons — education, medical, life science, technology, and finance. As such, the Boston real estate market has and always will attract local investors, as well as equity from throughout the United States and around the globe.
I’ve worked with many types of investors and home buyers throughout my more than 20 years of working in Boston real estate. My experience is that the majority of the international buyers in Boston are connected to Boston in a variety of positive ways. They buy a home here because their child is attending a Boston university, or they want to be near our world-class medical care, or they are relocating to here for a well-paying job in the tech, medical, life science, or financial services fields.
One of the study’s primary negative data points is that 64 percent of luxury condo owners in the sample do not claim their residential exemption, which the study calls “a clear indication that the condo owners are not using their units as their primary residence.” However, this point is superfluous. The requirements to obtain the exemption are time consuming and unwieldy for an annual exemption that amounts to only a few hundred dollars for most homeowners. As such, many people who purchase luxury units will not spend the time on something with such a small benefit.
Instead of depending on subsidies and rent control like other cities, Boston’s affordable housing policies create a virtuous cycle wherein the more projects that are approved, the more affordable units are delivered — thereby creating a robust workforce with the buying power to fill them. Moreover, every new residential development increases Boston’s property tax base – which helps the city become socioeconomically appealing to all – thereby attracting more and more residents.
While decrying projects like Millennium Tower in Downtown Crossing, the study ignores the fact that annual real estate taxes generated from Millennium Tower singlehandedly exceeds $12.6 million — equal to paying the annual salaries for 303 teachers or 168 police or 136 firefighters. Yet the number of police and fire calls to this building was four and the number of children using public schools is de minimis.
By Jason S. Weissman
Founder & Senior Partner – Boston Realty Advisors
Scaled Vertical Growth Necessary To Remain Competitive
By Jim Morrison | Banker & Tradesman Staff | Oct 8, 2017
Street intesection in Boston historical North End
The nationwide trend of real estate agencies mergers and acquisitions came to Boston this month with Douglas Elliman’s announced purchase of local Otis & Ahearn Real Estate. Smaller firms are feeling the pinch from rising costs and market forces, and more consolidations are likely.
The increased attention from out-of-town players has been a major topic of conversation around the watercooler at Boston Realty Advisors, said Jason Weissman, founder and senior partner – and he couldn’t be happier about it.
“It shows the strength of the market,” he said. “You have to look at Boston. If we end up going into a recession, Boston is going to have the softest landing of any city in the country because of the diversity of strong industries we have here. This city is going to outpace other cities.”
Boston Realty Advisors in the largest independent brokerage in the city as measured by gross commission income, Weissman said, and he has also been approached by other companies looking to acquire it. He’s not interested. In fact, he’s actively looking for companies to acquire.
“There’s no exit plan,” he said. “We’re very focused on serving our clients. They say if you love what you do, you’ll never work a day in your life and I love the business. I love competing and I love competing successfully. It’s extremely tough for smaller independents to compete. We’ve built the infrastructure to compete and win.”
Think Globally, Sell Locally
Gibson Sothebys is also in acquisition mode. Co-owner and chairman Larry Rideout said his company is not looking to be acquired, but he does see more acquisitions in Boston’s future.
“Big, New York companies are starting to see that Boston is on the map,” he said. “We’re also in acquisition mode. Now is a good time to consolidate in the Boston market. We’re looking for a cultural fit. Of course, the numbers have to work out and it has to be a win-win.”
Rideout said the white-hot Greater Boston real estate market can’t burn forever, but he thinks the signs point toward a few more good years. Companies that make smart acquisitions now will cash in on those good years.
“Permits are down, but they were up for a long time and things have to take a breath,” Rideout said. “Sales slowed a little this summer, but they’re going to come back. You have to look long term. Mortgage interest rates are low, money is cheap and Wall Street is doing OK.”
As Boston has become a more international city, Rideout said having the money and the network to market globally has become vital. Small, local companies just don’t have the same reach, making it harder for them to compete.
“You have to start thinking globally,” he said. “I have Sothebys, with an amazing international reach, and I still joined ‘Who’s Who in Luxury Real Estate.’ You have to use everything you can.”
Boutique Firms Can Compete With Behemoths
There’s still plenty of business for small, locally owned real estate agencies with excellent customer service, said Carmela Laurella, president of CL Properties. Laurella isn’t concerned with acquisition talk; she’s focused on remaining small and providing “excellent service and exceptional results.”
“Our firm is eight years old and we’re having one of our best years ever,” she said. “We operate like an investment banking firm. We choose to stay small and boutique. Most of our business comes from the Internet and repeat business. We have no problem getting listings and making sales.”
Deep pockets and a global reach are not as important as growing a local base of satisfied customers, she said. Big firms like Douglas Elliman and Berkshire Hathaway, who are both in acquisition mode, don’t bring that to the table.
“I wish them both well, but I do think they’ll have a hard time catching up,” she said. “This business is about people and relationships. I used to work for Coldwell Banker and Otis & Ahearn and when I left, my clients followed me, the agent, not the brand. We’re niche players. I have people who will walk over the Charlestown bridge to find me because they want me to sell their homes.”
Douglas Elliman did not respond to requests for comment.
Change Creates Opportunity
The trend of smaller companies being consumed by larger ones will continue in Boston, said Jeff Heighton, regional vice president and Boston-area general manager at Compass Real Estate. The Greater Boston economy is growing quickly and big companies are looking to capitalize on that.
“Boston is a major metropolitan area with a lot of investments from across the country and globe,” Heighton said. “If you’re a large company, you need to make sure you’re in the major markets across the country, like Boston. For companies that aren’t here, they’re thinking about it.”
Growing a business by acquisition is far more complex than simply buying an agency and changing the flag, he said.
“I’d say we’ll see more acquisitions in the near future at all levels as agents ask their firm, ‘What are you doing to grow my business?” Heighton said. “As that question can’t be answered, they’re going to look for companies that can. That’s part of what’s driving the consolidations.