Commercial Brokers Confident While Residential Brokers Are Feeling Glum: REBNY

As Demi Lovato once said, “What’s wrong with bein’ confident?”

Commercial brokers are feeling more optimistic about New York City’s real estate market than they have in years, while their residential counterparts are feeling sour, according to the latest report measuring broker confidence from the Real Estate Board of New York (REBNY) shared exclusively with Commercial Observer. 

For the second half of 2024, the REBNY’s Commercial Current Confidence Index hit 25.7, up from -23.1, the strongest it has been since the 2021 third quarter, according to the REBNY report. 

Commercial brokers’ confidence has been in negative territory since the second quarter of 2022 — with it falling to its lowest levels since REBNY started keeping track after the pandemic upended the office market — but has finally turned positive for the second half of 2024, thanks to strong retail leasing and the return-to-office push. 

“Commercial brokers have had multiple tailwinds that have converged, particularly in 2024. The office sector has gained traction as the year has progressed,” said Keith DeCoster, director of market data and policy for REBNY. “If you look at major metros across the U.S., New York City has one of the top return-to-office rates, and that’s accelerated in recent months. The retail sector, additionally, has for a couple of years been rolling along, and so commercial brokers are taking confidence from those trends.”

Brokers also are feeling good about the fact that the U.S. election is over and a more business-friendly president is in office. Other elements contributing to the good feelings include the approval of the City of Yes rezoning, which is designed to create more housing in New York City, and the adoption of the new tax incentive program, 485x, which replaced the long-lapsed 421a program. 

REBNY’s biannual confidence index measures brokers’ sentiment about current conditions and their expectations for the next six months, using a scale ranging from 100 to -100. Uniformly positive responses would rate 100, uniformly negative responses would rate -100, and neutral responses would rate 0.

Still, there is always at least one ant at the picnic. Despite the addition of these state programs to encourage more housing, residential brokers weren’t feeling as optimistic in the second half of last year, as elevated mortgage and interest rates were keeping buyers from the market. 

The residential confidence index dipped to -13.6 in the second half of last year from the -6.6 recorded for the first two quarters of 2024. Supply issues and the impact of congestion pricing on real estate also played a part in residential brokers’ more muted confidence for the latter half of last year, according to the report. 

“What’s happened is people who might have put their properties on the market are not,” DeCoster said. “So the sales inventory is low. And at the same time people who may have been able to qualify for a mortgage two or three years ago now have more challenges between tight inventory and also higher interest rates, so it really just puts a crimp on sales volume.”

Additionally, anonymous agents quoted in the REBNY report highlight that there is some fear within the residential broker community as it relates to the Fairness in Apartment Rental Expenses Act, which was passed by the New York City Council in December and is set to take effect in June. In its simplest form, the FARE Act requires that landlords, not tenants, pay the fee to brokers when listing apartments. 

There is concern among these brokers that their livelihoods will be impacted by this act. That is one of the reasons REBNY is challenging the act in federal court.  

However, DeCoster thinks residential broker sentiment could change in 2025 as more projects are developed under the rezoning and tax incentive initiatives.

 “There’s a lot of positivity surrounding [these initiatives] but it will take some time,” he said. “But it’s positive to see the city and state gathering and agreeing on the need for more housing and incentives that make that process easier.”

Anticipation over the impact of these programs as well as the expectation that there will be less regulation of the financial sector has brokers mostly bullish on the market in 2025, according to the report.

“Over the last handful of years the market has been beaten up a little bit,” said Brent Glodowski, director of the capital markets group and investment sales at Avison Young. “But I think now there is a general sense that we’re through that bottom trough and we’ve got nowhere to go but up.”

Amanda Schiavo can be reached at aschiavo@commercialobserver.com.