Behind the co-op comeback
Market mainstay's comeback brings stability amid tight market, new commission rules
New York City’s co-ops couldn’t have better timing.
A wave of settlements answering antitrust lawsuits has rocked the real estate industry, threatening to change the way agents earn income and raising questions about the role of brokers representing buyers. Add that to a market slowed by high mortgage rates and waning inventory, and some brokers are already feeling the pressure trying to plan for the future.
But after a lull, buyer’s agents dealing in New York City co-ops are finding that they have a steady bet at a time of uncertainty in the industry.
The co-op market is one where buyer’s agents, especially experienced ones, are an essential part of transactions. These brokers know which buildings are likely to accept a buyer, how to assemble a board package and how to curry favor with shareholders in an interview.
The brokers who’ve spent their careers trading co-ops have turned deals into perennial places at the top of the industry, an appealingly steady gig as regulatory changes roil broker commissions.
Co-ops’ market rally
Demand for co-ops stagnated over the past decade as new development condos flooded the market. Buyers with deep pockets traded stringent board rules for condos’ more relaxed requirements, bigger bathrooms and shiny new amenities.
But a turning point came last year, when buyers seized on the city’s new-development condos, sapping inventory and shifting the spotlight to resale condos and co-ops.
“The market is divided into three streams: new development, [resale] condos and co-ops,” said Frederick Warburg Peters, broker and president emeritus of Coldwell Banker Warburg. “New construction clearly commands the most money, but it’s also definitely true that co-ops are becoming a value play.”
Co-ops tend to be less expensive than condos in overall price and in monthly costs because of the difference in how the two property types are taxed, Peters said. Both resale condos and resale co-ops are likely to need a renovation, but the cost of fixing up a co-op might be offset by money saved on the purchase price and monthly fees.
But the downside of buying a co-op in need of a renovation harkens back to a stereotype about the property type: stiff restrictions. Boards have to approve renovation plans, and they have a reputation for denying plans to add bathrooms or through-wall air conditioning.
“There are still buildings — though not as many as there used to be — that have summer work rules,” Peters said. “If you’re buying a big apartment, you basically have to own it for two years before you can move in.”
“I don’t find the names really change. I think we just get older.”
Last quarter, co-ops also notched modest price growth compared to condos, which saw declines, according to a report by appraiser Miller Samuel. Report author Jonathan Miller chalked the discrepancy up to a shift away from the high-end condo sales that have saturated the market in the past few years.
Manhattan co-ops had a median sale price of $815,000 in the first quarter of 2024, up slightly from $799,000 in the same period last year. The average price per square foot last quarter grew 6.2 percent annually, to $1,230.
The median sale price for condos – about $1.6 million — remained relatively flat in the first quarter compared to that of 2023, but the average price and price per square foot declined 7 and 8 percent year-over-year, respectively.
“New development product has largely been sold off,” Miller said, “whereas the housing stock for co-ops is pretty much static. It doesn’t change all that much.”
Top brokers
If co-ops are the lifeblood of New York City real estate, then the brokers who deal in them are the heartbeat. The handful of agents who have maintained their reign over the industry are experts in navigating how to get buyers into the sometimes particular property type.
Co-op buildings are like characters, each with its own personality, rules and requirements, and learning the ins and outs of the properties takes decades. Such names as Brown Harris Stevens’ John Burger and Lisa Lippman, Sotheby’s International’s Serena Boardman and Corcoran’s Cathy Franklin have ridden the learning curve to the top of the co-op game.
Those four brokers topped The Real Deal’s 2023 ranking of the top co-op brokers across Manhattan, Brooklyn and Queens. They’re known for closing deals at buildings bordering Central Park and along Park Avenue — some of the city’s most well-known and exclusive co-ops.
“With co-ops, it’s the same 20 percent of brokers,” said Douglas Elliman’s Lauren Muss. “It’s a very tight-knit group of people that all know each other and deal with each other.”
Co-ops have a reputation for being a “who you know” business, both for buyers with plans to purchase in the building and the brokers who represent them. Muss said that hasn’t really changed in her 30 years of selling co-ops.
“I don’t find the names really change. I think we just get older,” said Muss, who was also among the top co-op brokers in the city last year.
The city’s steady supply of co-ops is an attractive line of business for brokers, especially those working on the lower end of the market. Co-ops are the entry point to buying in the city, and there’s enough of them to rack up commissions with a high deal volume.
But breaking into the higher-end co-op buildings is a tall order for newer brokers unfamiliar with the quirks of each address and the board in charge of it. The barrier to entry perpetuates the leading brokers’ places atop the market, and the lesser-known names peddling these properties are often working on teams with agents at the apex.
Others say the tide is beginning to turn. It used to be commonplace for selling agents to turn away clients of unfamiliar buyer’s brokers, particularly at well-known co-ops. Now, new brokers are entering the market with wealthy buyers that aren’t New York City-born-and-bred heirs, socialites and financiers.
Along with brokers, some co-op boards are more lenient with fresh faces and names. Lippman sold a $20 million apartment at 115 Central Park West last year to someone who wasn’t a New Yorker or particularly recognizable among social circles in the city — a previously unthinkable buyer profile for the exclusive address.
“He didn’t have letters of recommendation from fancy New Yorkers, but he got through a pretty tough board,” Lippman said. “They understood that it was a good price and that he had plenty of money.”
As foreign money continues to pour into Manhattan, some co-op boards, which historically boxed out international buyers, have become more friendly to them as long as they have assets in the United States.
“There’s always a new broker out there, and people make their money in all different ways and in new ways,” Lippman said. “You can spite yourself if you’re not more open.”