By JOSH BARBANEL
As he dotted the Manhattan landscape with a dozen condominium projects in recent years, developer Gary Barnett, president of Extell Development, had left sales in the hands of a team of brokers at Corcoran Group.
Toll Brother City Living
Developers of more luxury buildings such as the Touraine, in rendering above, are hiring their own staffs of brokers.
But a few weeks ago when Mr. Barnett kicked off marketing at his most ambitious building yet, One57, he opted to hire his own sales staff.
The 953-foot glass tower under construction on West 57th Street has apartments with listing prices totaling more than $2 billion, which would generate sales commissions amounting to tens of millions of dollars.
Mr. Barnett said he would still work closely with Corcoran Group, which had helped Extell to sell more than 2,000 condos since 2005. But hiring brokers directly, he said, would give him more control over the marketing message and the staffing of the sales office at his new project—not to mention reducing costs.
“To be frank, there is an awful lot of money in sales commissions and we want to get a piece of that ourselves,” Mr. Barnett said.
Brokers and developers say that commissions on large projects are negotiable, but typically range from 1½% to 3% for selling brokers. “That is a big number when you are talking about $2 billion,” he said.
Mr. Barnett isn’t alone.
During the housing boom, sales teams from major brokerage firms made millions by helping with the development of ever-more extravagant buildings and then generating commissions from selling apartments.
But with buyers more cautious, more big developers with a focus on the bottom line are taking a do-it-yourself approach, forming internal sales teams.
A few months ago, veteran developer Harry Macklowe hired Richard Walgreen, the broker who headed the sales team at the successful project at 15 Central Park West, to lead a new in-house sales effort.
Lauren Lancaster for The Wall Street Journal
One57
Mr. Walgreen will be in charge of sales of condos at the conversion of two pre-war Upper East Side apartment houses at 150 E. 72nd St. and 737 Park Ave. when they go on the market in the coming months, brokers say. Mr. Walgreen and Mr. Macklowe declined to comment.
As the condo building boom got under way during the last decade, some top developers turned over their sales operations to marketing experts, who aimed to move apartments with techniques akin to those used to sell perfumes or expensive watchers.
They brought in celebrity designers, famous chefs and unusual services and features that could add hundreds of dollars a square foot to sale prices, compared with nearby buildings. As the prices fell during the downturn, brokers say buyers became much more careful with comparison shopping, and developers became more attuned to what buyers wanted.
Even Related Cos, now one of New York’s most successful condominium builders, hired an outside marketing and sales team, the Sunshine Group, when it launched sales at the Time Warner Center in Columbus Circle in the early 2000s.
The Sunshine Group was headed by Louise Sunshine, who distilled her marketing approach with the trademarked phrase “All Square Feet Are Not Created Equal.” With the success of the Time Warner Center, Related created its own in-house sales team, which went on to sell many other successful projects, including Superior Ink in the West Village, without paying commissions to outside selling brokers.
The Touraine, a new building on East 65th Street and Lexington Avenue, was put on the market in October, with a sales office staff by an internal team hired by Toll Brothers.
By Thanksgiving, 17 of 22 apartments, mostly large two- and three-bedroom units, were in contract, said Todd Dumaresq, marketing manager for the Toll Brothers City Living unit.
Mr. Dumaresq attributes the project’s success—the developers have raised asking prices four times—to a design tailored to the needs of Upper East Side buyers. He said the in-house sales team was cost effective. Toll Brothers has a team of sales people, he said, and when they need someone, “We acquire talent from the area.”
But Stephen G. Kliegerman, who oversees new development marketing at both Brown Harris Stevens and Halstead, said that do-it-yourself sales were “almost impossible” for newer, smaller developers.
“They don’t have the reach and the name recognition to make it work,” he said.
The Sunshine Group was sold and eventually merged with the new development arm of Corcoran in 2005 to create the Corcoran Sunshine Marketing, which ran sales for Extell over the years. That sales role ended with One57, which includes 13 condominiums priced at more than $42 million, including two huge high-floor duplexes listed for $98 million each.
Asked about Extell’s switch, Pamela Liebman, president of Corcoran Group said Corcoran was a consultant on the project and continued to provide logistic support for the sales office at Extell on One57. “We are doing a lot on the project,” she said.
Even the brokers hired by Extell, Daniel Tubb and Jeannie Woodbrey, were specialists in new development at the Corcoran Group before they took over One57 sales.