Banker & Tradesman columnist Scott Van Voorhis raises the question: Will the auction strategy save Greater Boston’s once-booming luxury condo market? Here are excerpts from Banker & Tradesaman:

The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.

But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.

In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.

….In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.

“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”

Will the auction strategy save Greater Boston’s once-booming luxury condo market?

The jury is still out on that one, but there’s mounting evidence that this seemingly desperate sales tactic is starting to yield some results.

Sales in the Boston area’s luxury condo market, after having ground to a halt in the dark days of last winter, are starting to pick up again at some projects.

And one of the main factors driving the increase is a shift by a growing number of developers to embrace the auction process, contend boosters.

Not everyone, though, is buying into the new tactics, with the developers of some of the area’s biggest new projects so far choosing to stay the course.

In fact, some counter that auctions are far from a cure-all, and traditional sales methods, combined with some timely price drops, can achieve the same results. Berkeley Investments is touting its recent success in selling condos in Boston’s Fort Point Channel neighborhood using more traditional sales tactics, and has even formed a marketing subsidiary to spread the new gospel.

But coming off a period in which sales of high-end condos fell off a cliff, it’s hard to argue against success, even if it has been a hard comedown for some developers from some bubble-year price expectations. For some, the argument can be likened to the age-old Band-Aid dilemma of a little pain at a time, or a lot all at once.

“Do you want to do it in one big shot, or go through the pain of having [multiple] price drops?” asks Thomas Skahen of marketing and research firm PrimeTime Properties, an auction fan himself.

Apparent Auction Success

So far, the numbers appear to back up the auction boosters, not the traditionalists.

The overall pace of condo sales in downtown Boston slipped somewhat in 2009, from a paltry 1.2 sales a month to just one sale a month at 11 new projects tracked by PrimeTime.

But those developers that adopted an auction strategy had a very different result, with sales three or four times the typical pace.

In fact, if it weren’t for the sales generated by a series of condo auctions at the Bryant, which straddles the Back Bay and South End, and the South End’s 1850, the overall pace of downtown condo sales would have dropped a stunning 50 percent, PrimeTime’s Skahen notes.

Thanks to a successful auction, the 1850 averaged more than three sales a month, while the Bryant recently sold 10 units at auction and another nine afterwards. Combined with previous sales, 30 of the new condo development’s 50 units are now sold out.

A similar story can be found in the suburbs at the Nouvelle at Natick, a new condo high-rise at the Natick Collection.

Once a laughing stock with just a few units sold, the Nouvelle is back in the game, with an auction in October kick starting a stalled sales campaign.

The downtown-style high-rise not far from Route 9 is now more than 50 percent sold, with 113 units in the hands of buyers, compared to just a handful a few months ago.

Desperate Times, Desperate Measures

The skeptics and traditionalists acknowledge the auction strategy’s success in moving units in a rough market. But they say the low selling prices condos are fetching at these auctions should give developers pause.

John Ford, head of Ford Realty brokerage, said the less than $700-per-square-foot that units at the Bryant fetched at auction was hardly impressive for super-luxury Boston units.

While prices of the flurry of Bryant condos sold in the weeks after the auction appear to have broken the $1,000-per-foot market, according to the developers, this still represents a significant discount for two-, three- and four-bedroom units that come with their own private elevators.

The pricing comedown has been even more dramatic at the Nouvelle. Dreams of selling units for well north of $1 million at the high-rise, which towers over the newly revamped and very upscale Natick Collection, are long gone. A penthouse unit that had been on the market for an eye-popping $1.7 million sold at the October auction for a pedestrian $626,000.

In Ford’s view, one of the problems of the auction strategy is that it can make a developer appear desperate.

“When I see an auction, I see it as a desperate move by the developers,” Ford said. “It might behoove some developers to just reduce the properties to the current marketing levels, than to desperately go to an auction format. I think buyers see the same thing.”

Opportunity Knocks

In fact, traditionalists like Ford may soon have their own dog to root for in this fight.

No fan of the auction process, Berkeley Investments completely revamped its marketing strategy in a bid to move units at its stylish new FP3 condo project in the Fort Point Channel area.

Berkeley dropped prices, with a number of units available for less than $500,000, while adopting a more targeted marketing strategy that featured winning over key brokers and holding events to highlight the project.

The 92-unit FP3 is now nearing the halfway mark in its sales campaign, having increased the pace to three closings a month.

In fact, Berkeley hopes now to help other local condo developers move units through this more patient, targeted approach, having launched a new venture called ResMark, notes Joe Laurano, the Berkeley executive in charge of the venture.

That’s all nice and fine with Paul Sunshine, president of New York-based Domineum, which recently helped launch the auction and marketing blitz that sold 19 units at the Bryant.

Sunshine contends things should get even slower for downtown Boston condo developers in the months ahead. After all, he argues, he just scooped up most of the available buyers.

“If a developer can wait it out, that’s a perfectly plausible strategy,” he said. “In the meantime, I am happy to take all the buyers.”

Author Profile

John Ford
John Ford
EXPERIENCE

Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs



In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.



HISTORY

For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.

AREAS COVERED

Back Bay

Beacon Hill

Charles River Park

Downtown/Midtown

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South End

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Surrounding Communities of Boston
Contact
John Ford and his staff can be reached at 617-595-3712 or 617-720-5454. Please feel free to stop by John's Boston Beacon Hill office located at 137 Charles Street.




John Ford
Ford Realty Inc
137 Charles Street
Boston, Ma 02114

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