To gain some insight into the current real estate market, we talked to one of the most knowledgeable people in the business.
Alf Nucifora is the chairman and founder of LuxeSF. A native of Brisbane, Australia, Nucifora entered the advertising and marketing business on the corporate side working for two Fortune 500 companies, first in Australia and then in the United States. He is a graduate of the University of Queensland with an MBA from the Harvard Business School. Nucifora is a popular speaker, frequently addressing Fortune 500 companies, organizations, and associations across the country and abroad.
Here’s what Nucifora said about what is taking place today in the real estate market, and in the economy as a whole.
What do you see taking place in San Francisco’s real estate market?
What I’m about to tell you would be very much anecdotal. LuxeSF has a database of [more than] 7,000 productive agents in the Bay Area — representing some 15 brokerages, including all the major brokerages in the region. So I’m in constant contact with these people. When I ask agents if they’re going to make as much money or less money than they did last year, the majority anticipate making less. Understandable, given the circumstances.
Homes under $2 million continue to march off the shelf as before. In the $3–$10 million range, those sales are slowing down, but still moving; $10 million-plus, who knows? Those are very specific properties that will find a buyer at some point in time.
There’s an excess of condos on the market. I think we’re going to see price suppression there. And if I had a lot of spare cash, I’d buy condos in the city at bargain prices.
We’re going to see a lot of agents washed out of the business, just as in 2008. Agents who were doing one property sale every 12 months or so left real estate in the ’08 crash. I think the same is going to happen in 2020.
What about commercial real estate?
Watch the cratering of the commercial real estate sector. We know that a lot of leasing bills were not paid in those high-rise buildings. We know a lot of the monthly retail leasing costs were not paid by the lessees. Work from home has taught many of our corporate leaders that they could leave their people at home and not have to worry about bringing them into the office anymore. I think you’re going to see a reduction in the demand for office space — not immediately, but over the next 12–24 months. I suspect that somewhere between 20–50 percent of the marketplace eventually says the new model is going to be work from home.
What do you think about the consolidation of brokerages taking place in real estate?
There has long existed a trend in this country toward corporate consolidation. In the end I believe that there will be five of everything — five global accounting firms, five global law firms, five global advertising agencies, and by extension, five very large real estate companies.
Brokerages run on low margins. Up until now, agents have operated as independent contractors. That means thousands of them in the Bay Area marketplace, all trying to drum up business through referral and word of mouth, operating in a Velcro mode — if I throw my name out there hopefully it will stick. Marketing is going to become too sophisticated for that to happen in the future.
Ultimately the model will be exactly what Robert Rifkin with Compass has described. Analyzing big data, brokerages will identify a home buyer before the buyer even knows that he or she wants to buy. And these brokerages will have proactively identified a home that is perfect for that individual buyer based on his or her tastes, needs, and budget. If you’re a small brokerage with 50 agents, you just don’t have the wherewithal to do that.
What about the concept of luxury, given all that’s going on today?
I’ve always felt that the word luxury has been diminished and over-used through the years, much like the word quality. In the old days, luxury essentially meant conspicuous consumption. Today I think that the concept of luxury is moving away from the consumption of tangible wealth to the enjoyment of experiences that add to the quality of life. It’s a very European concept. You don’t put it on the outside for show. You put it on the inside where you can enjoy it. Which is the absolute antithesis of the way money is spent in aspiring environments — think the nouveau riche in China and Russia. And Texas.
What gives you concern?
The big thing, obviously, is Covid 19. I also get very concerned about the current lack of commonweal in this country.
The bigger issue to me is that we may be in for a cataclysmic financial collapse. The end of July is not going to be pretty. We’re going to start seeing second quarter corporate earnings reports released, and they are going to show an absolute collapse in numerous sectors, including retailing, travel, and hospitality. At the same time, amnesty for mortgage payments and corporate leases will be ending.
I cannot see how we’re going to get through December without some form of economic collapse. And that’s before even taking into account the November election.
Is there anything that makes you hopeful at this point?
Of course. I’m not an American by birth. I’m an American by choice. I came here because there’s a DNA in the American personality that is so much to be admired. I’m a long-term optimist about our ability to see sense and to wake up. In moments of extreme crisis, we find our better halves, our better souls, and that comes to the surface.
I don’t believe in exceptionalism for any country. But I believe there is something special in our DNA, and we need to nurture and encourage that. We will have to fix the economy again, just as we did coming out of the 2008 recession. But we will, because we’re a smart, resilient, and productive nation.
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