Coldwell Banker Previews
How is the current market and shortage of inventory affecting the luxury market? I think the luxury market – and I think everyone is aware of the unbelievable, unprecedented increase in luxury properties over $1 million – has been affected in a big way. For example, the most expensive condo ever purchased in Chicago last year was in the Park Tower for $15 million. I think that was the result of it being a very specific property, as well as it being the end of the year to make sure they didn’t get beat up with taxes.
With the shortage of inventory, and all of these luxury buyers coming to us, it made for a great year in 2012 for the premium market. When I say premium market, I’m not talking just about price, but I’m also referring to properties that are exceptional all around – in terms of location, design and amenities, too. Some of the most exceptional units we’ve seen in high rises have been units that the owners bought and then re-designed to make unique and exceptional, a true standout. When those units eventually go back on the market, they are one-of-a-kind units that are desirable for what the affluent are looking for today. It sounds odd for someone to spend $2 to $3 million and then pay to re-do it, but luxury buyers are doing this all over the country, including in Chicago.
The luxury market has gotten tighter, and expectations of the buyers are much higher than they used to be, but the product buyers are seeing now has definitely improved. What used to be considered luxury, even in the Gold Coast 10 to 15 years ago, would never fly today. We’ve gotten to the point where these buyers expect the exceptional. The luxury market is still down compared to where it was at its highest point, but we’re definitely beginning to see better quality, better design and better properties overall.
We did a lot of research focused on affluent buyers in terms of year-over-year averages, price per square foot, etc., looking at properties $1 million and up all over the globe, but particularly in the U.S. and Chicago. Premium properties in good locations (Highland Park or Lincoln Park, for example), where inventory is tight, haven’t changed. It’s about the most premium property in the most premium area, and that’s the tightest market we’ve seen. We’ve seen an increase in the demand for each increment of listings – $1 to $3 million, $3 to $5 million and $5 million and up – in Chicago.
If you look at the Gold Coast and Lincoln Park alone, we had nine closings of over $5 million just in 2012. This is a 180 degree turn from 2009. Luxury buyers are looking for premium, full amenities, state of the art. There’s a new level of what we consider standard in luxury; today’s product, both in condos and single-family luxury markets, is beyond exceptional. It’s about, “What is it like to live there?” The home is in the right neighborhood with the right schools, the right restaurants, the right shops, etc.
The consumer has become more aware, and video has become the main form of communication with buyers; our own YouTube channel has had a 112 percent increase year-over-year. The current consumer is more digital; they’re looking at our online presence and online marketing, and bigger, richer photography has become a hallmark of luxury marketing in the past three years. These elements are having a huge impact in marketing luxury properties these days. Also, high-end material is very important today. No more middle-of-the-road, shoddy marketing pieces in luxury. The bar has been raised by the previous bad market, which forced us to be creative, out-of-the-box and to come up with some outstanding properties.
Luxury sellers look for agents who have experience in the luxury market as well as the local market; 70 percent want them to have expertise in the luxury market. They want them to be part of a strong network. The average seller wants to know that you have some market share, but with the affluent, it’s definitely a different game. They want to get the maximum exposure; the affluent are looking for outstanding websites, Internet domination, a really strong online presence and strong luxury print publications. In addition, in real estate, luxury magazines are on the rise, and the affluent read them and use them as a resource to find their home.
Times have changed in the luxury market. The level at which you need to perform as an agent representing the affluent has been raised in regard to marketing materials, exposure, etc. The consumer is so much more aware and in touch than they had been before that they’re demanding a lot, and we really need to be at the top of our game.