Andrew Heiberger announced Thursday that he was shutting down sales and leasing operations at his TOWN residential brokerage.
“Today, I made the decision to pivot TOWN Residential from the re-sale and rental business to focus on the new development and international sectors,” he said in a statement posted to LinkedIn.
“Due to the new realities of the new marketplace, it is simply impossible [to] profit from those lines of business when considering the primary factors of the rapidly increasing agent commissions stemming from fierce competition to attract and retain the best talent; lead generation platforms; and the disruptions on the tenant side of the rental brokerage business.
“There will be another great endeavor to come, stay tuned.”
The company declined any further comment.
According to The Real Deal, 400 agents will be looking for new brokers and those left at TOWN will operate from one office at 888 Seventh Avenue office.
The firm’s website has six new development projects listed, including 159 Tompkins, Liberty Toye and 280 St Marks in Brooklyn. The division has been led by Elaine Diratz since the departure of veteran new development specialist, Shlomi Reuveni, last Spring.
Last May, TOWN also formed an international alliance with London-based Chestertons, giving it access to luxury properties for sale across Europe and the Middle East, where Chestertons has a strong presence.
The TOWN pull-back comes as real estate sales in Manhattan suffer their worst dip in nine years, according to first quarter market reports.
New Trump tax laws have been blamed for much of the 25 percent drop in sales of condos and co-ops in Manhattan, and both luxury sales and new developments have been particularly hard hit.
Tax laws that cap the deduction of state and local taxes, including property taxes, from federal tax bills are expected to stifle activity among high earners in high-tax states like New York.
And with a heavy pipeline of new developments coming to market in the next two years, brokers are worried things will get worse before they get better.
Nevertheless, new firms such as British upstart Purplebricks continue to push their way into the city in a grab for market share.
Calling itself the “next-generation real estate agency,” Purplebricks lured veteran broker Robert DiBiase from Halstead to be Regional Director last month.
Purplebricks charges home sellers a flat fee of $3,200 to list their home and payment of the buyer’s agent commission on closing.
Purplebricks U.S. CEO Eric Eckardt described TOWN’s decision to shut down its resale and leasing practice as “just the tip of the iceberg. As the industry continues to evolve around technology, he said old models simply won’t be sustainable in the long run.
“We’re seeing more and more evidence of this across the board, and we feel it’s an indication of a tidal shift beginning to take hold,” Eckardt said. “Like much of the industry, which has been slow to adopt change, the traditional commission model for residential transactions is antiquated, and operators should take a serious look at alternate ways to structure deals to remain competitive.”
Other discount brokerages such as Redfin and LG Fairmont have been tinkering with commission fees, too, as they face-off with Manhattan big guns Corcoran and Elliman.
Larry Link, president of the boutique Level Group, said the demise of TOWN came as no big surprise.
“Weʼve seen the writing on the wall regarding Town for years now, starting with court filings from three or four years ago containing internal emails between Heiberger and his CFO that showed they were essentially insolvent even way back then,” said Link, noting his firm has seen a “bump” in inquiries from Town agents “and, in fact, from many of the larger companies.”
In the age of ever improving technology and agent/self-generated leads, Link believes traditional” brokerage models “ultimately are destined to crack under the weight of bloated overhead and out-of-touch commission splits.”
He added, “Thatʼs the main reason we formed Level Group nearly 15 years ago, and it remains a strong driver of our business today.”
