The luxury market in 2021: sky-high prices, scandals and acquisitions https://ift.tt/3E8LzAS

The luxury housing market had a strong year in 2021. High net worth individuals continued to buy and sell homes at a quick pace as they and their businesses generally thrived amid the continued trend of working from home.

As a result, many luxury agents had outstanding years. The percentage of existing single-family home sales priced above $1 million also shot up this year, which helped agents in this market sector, as home prices across the country more generally surged.

But 2021 also saw some significant shakeups in the luxury real estate world — a number of acquisitions changed the scene and a major industry figure stepped out of the limelight. Tragedy also found the luxury market this year when a condo building in Miami collapsed and took numerous lives with it.

But luxury real estate wouldn’t be the same without its penchant for scandal and big price tags, and 2021 delivered this as well.

Here’s all you need to know about what happened in the luxury market in 2021.

Major acquisitions

A number of major companies in the luxury realm were involved in big acquisitions this year.

The splashiest was probably @properties’ acquisition of Christie’s International Real Estate, which was announced in November. After a competitive process drawn out over the course of a few months, @properties earned the luxury giant’s trust enough to prove they were the best company to help guide the Christie’s International Real Estate brand into the future.

At the time, @properties co-CEO and co-founder Thad Wong said he hoped to shape Christie’s International Real Estate into “the most valuable luxury real estate brand in the world” by combining the company’s already eminent brand name with @properties’ top-notch technology, marketing, coaching and company culture. Wong added that the brand is “a beautiful Ferrari frame” that @properties planned to infuse with new life.

Realogy and Sotheby’s auction house (not the Realogy brand) also teamed up this year to buy luxury real estate auction marketplace Concierge Auctions. The deal bestowed the two companies with a 80 percent joint ownership stake in Concierge Auctions with Sotheby’s and Realogy executives joining the auction marketplace’s Board of Managers. Concierge Auctions would continue to operate independently after the transaction was closed.

“As demand for luxury real estate auctions increases, we believe Realogy and Sotheby’s can jointly bring powerful data and network scale to Concierge Auctions, a valuable tool for real estate agents helping clients expertly navigate the global high-end property market,” Realogy President and CEO Ryan Schneider said at the time.

In August, international luxury brokerage Engel & Völkers announced that a majority stake of the company would be acquired by Global private equity firm Permira. Engel & Völkers Founder Christian Völkers moved into the role of chairman of the supervisory board, while the brokerage’s management board remained the same and Sven Odia held his existing role as CEO. Dr. Jörg Rockenhäuser, managing partner DACH at Permira, and David Brückmann, principal, joined the management board as part of the transaction.

Engel & Völkers Americas President and CEO Anthony Hitt called the deal “the best of both worlds” with the brokerage gaining all the expertise and capital of Permira while maintaining the stability of the family operation the company has always had.

Meanwhile, a New York indie mainstay, Warburg Realty, was also acquired by Coldwell Banker, the companies announced in October. Once all is said and done, Warburg will operate under the name “Coldwell Banker Warburg.”

Coldwell Banker CEO M. Ryan Gorman stressed that the acquisition was “not a deal, people, this is a marriage,” during the brokerage’s Gen Blue event, and that the process was “an emotional journey.” Frederick Warburg Peters, as well as the brokerage’s management team, were set to remain with the company after the transition.

Tragedy spurs scrutiny of older condo buildings

Tragedy struck the Miami region when a 12-story luxury condo building partially collapsed in the town of Surfside, seemingly unprompted, during the wee hours of the morning on June 24. Roughly half of the units in the 130-unit residential building, Champlain Towers South, collapsed while officials were left wondering the exact cause or how secure the rest of the building remained. The accident followed just after building management had begun repairs as part of Florida’s required 40-year recertification process

As officials continued to investigate the collapse, details emerged about an engineer’s report dating back to 2018 that cited significant concrete damage in the building’s basement, as well as photos from a commercial pool contractor who visited the building just days before its collapse and voiced concerns about cracking concrete, exposed and severely corroded rebar, and pools of standing water. But, for all those warnings, the condo board’s inaction ultimately cost 98 lives, officials found, by the time investigations concluded about one month later.

The horrific accident spurred a slew of building inspections across Miami, and even some building evacuations where residents were forced to flee at a moment’s notice, due to unsafe conditions. Agents told Inman they thought the catastrophe had a palpable impact on the market — one that could potentially alter it forever. Building managers received renewed scrutiny, and agents’ clients started asking new questions — like whether there was documentation of older buildings’ recertification process.

Unfortunately, shoddy construction issues haven’t only been isolated to the Miami area, or even Florida — it’s been a surprisingly common occurrence in high-end residences across the country over the last few years, a report from Inman showed.

The luxury market’s invincibility

The strength of the luxury market in 2021 created a sea change for luxury rental hot spots. A phenomenon that might have seemed like a blip in 2020 became a verifiable trend in 2021, namely, the dissolution of the shoulder season in vacation markets. As cities lessened restrictions and many prepared for a return to the office in the fall of 2021, agents thought a traditional slowing of vacation markets was on the horizon — but it never transpired.

“There will definitely be no Tumbleweed Tuesday,” Nest Seekers Private Client head Noel Roberts told Inman then, referring to the day after Labor Day when most of the people who came to the Hamptons for the summer leave until the following year.

Roberts reported that more and more clients were looking for rentals late into the fall, while property owners were also seeking to extend their own stay in markets like The Hamptons through September, leading to a scramble for inventory.

On the for-sale side, the market also thrived throughout 2021, as luxury buyers continued to benefit from work-from-home policies with their incomes largely unaffected by the pandemic. Staying at home more often meant luxury buyers that “want it all,” as Michael Altneu, vice president of Coldwell Banker Global Luxury, told Inman, which often translated into more over-the-top properties with a heftier price tag.

Gay Cororaton, a senior economist for the National Association of Realtors (NAR), also gave Inman some hard numbers reflecting the increase in luxury sales over the last year: In 2020, the overall share of homes in the U.S. that sold above $1 million was 3.48 percent (equal to 2019). But in 2021, that figure shot up to 6.61 percent.

The end of an era at Douglas Elliman and beginning of a new one

Long-time Douglas Elliman CEO Dottie Herman stepped down this year to take an advisory role as the brokerage’s vice chair, while former president and chief operating officer Scott Durkin took up her mantle. Herman’s accomplished career has spanned across more than four decades and has been dotted with numerous accolades, including being named to Forbes’ List of America’s Self-Made Women back-to-back in 2016 and 2017. After several years with Merrill Lynch and Prudential Long Island Realty, Herman purchased Douglas Elliman in 2003 with business partner Howard Lorber.

Durkin had been on Herman and Lorber’s minds for the last several years as a likely successor. “I am impressed by [Scott’s] experience, tenacity and his appeal to agents, managers and staff alike,” Herman said at the time. “Elliman is in excellent and very capable hands.”

Herman’s decision to step down came at an interesting time. Just one week earlier, Herman incurred a bit of ire for an appearance on Fox Business in which she railed New York City’s increasing crime and how it might negatively impact New York’s rebounding real estate market.

However, agents Inman spoke with largely disagreed: “All New Yorkers are concerned about the increase in crime, but it hasn’t changed the buoyancy of city life and the streets are busier than ever,” Fox Residential Founder Barbara Fox wrote to Inman. “I’m never afraid to walk around the city (and I do a lot of that!) and don’t find the streets daunting at all, at any time of day.”

That wasn’t the end of Douglas Elliman’s big news this year, however. In November, the brokerage announced it would be spinning off from parent company Vector Group in a bid to go public — and in an effort to woo investors who won’t back a cigarette maker (Vector Group also owns tobacco company Liggett Group).

If approved, Lorber will become CEO and chairman of the new company, Douglas Elliman Inc. Meanwhile, current CEO of Douglas Elliman, Durkin, will become CEO of the company’s new brokerage arm, which will be called Douglas Elliman Realty. The company will trade under the ticker “DOUG.”

The year’s top home trends

As Altneu told Inman, luxury homeowners “wanted it all” in 2021, and that led to new amenities being incorporated into homes.

From bowling alleys to spa spaces to home theaters and large outdoor areas, luxury homeowners sought to make designated spaces for every facet of their lives available at their fingertips within their own home. Connoisseurs also started to require places of honor for their collections, which included temperature-controlled wine rooms with plush tasting areas, built-in humidors for storing cigars, large garages and two-story closets.

Tyler Jones of Blue Heron told Inman that buyers wanted homes with a deep integration with nature now more than ever with features like floor-to-ceiling windows, pocket doors that open to the exterior, sheltered outdoor spaces that merge to the indoors and waterways that flow from outside to the home’s interior. “We really emulate nature and find different ways to speak to you and give you that sense of relaxation and calm that you can feel in an outdoor setting, but through a man-made structure,” Jones told Inman.

Home gyms generally remained part of the conversation for buyers, but the Peloton room — which was all the rage during pandemic lockdowns — seemed to fade from the spotlight. Reports from early November showed that Peloton sales were down, and the company even suggested in a shareholder letter that the exercise bike’s reputation as a luxury item may also be hindering its growth in the long run.

Luxury scandals

In a world where real estate is often now “celebritized,’” luxury real estate wouldn’t be true to itself without a touch of scandal on the side. And 2021 delivered.

During the peak of eviction moratoriums, fashion editor André Leon Talley became entrenched in a bizarre fight to not be evicted from a Westchester home he had been renting for close to two decades. In 2004, Talley had drawn up an agreement with Manolo Blahnik CEO George Malkemus and Anthony Yurgaitis, Malkemus’ business partner and husband, for Talley to rent the 11-room white colonial from them.

In 2014, the lease expired and was not re-signed, at which point, the money Talley paid Malkemus and Yugaitis each month reportedly fluctuated significantly, depending on what kind of income Talley had coming in. In response, the couple filed to evict Tally in November 2020.

“The matter we are dealing with is unfortunate, but will be handled by my very capable legal team at this time,” Talley said in an Instagram post to supporters.

Meanwhile in Los Angeles, Mohamed Hadid, real estate developer and father of supermodels Gigi and Bella Hadid, entered a contract in May to sell a spec mansion he battled with for years for $8.5 million. After being told the mansion was a “clear and present danger” to surrounding homes by city authorities, and being ordered to tear it down, Hadid filed for bankruptcy, but was still able to get the buyer to take on the demolition work.

Celebrity woes continued at Trump-branded condos in New York City in 2021, following the former president’s eventful exit from office. Trump properties saw fewer sales than in previous years, according to data reviewed by Inman, and had asking prices well below Manhattan’s average.

In Palm Beach, demolition crews razed convicted pedophile Jeffrey Epstein’s mansion after real estate developer Todd Michael Glaser bought the property in March for about $18.5 million. The property, along with a New York townhome, was the site of many of the alleged assaults of minors described by victims to police and in a Netflix documentary Jeffrey Epstein: Filthy Rich.

“I only got involved in the sale of Jeffrey Epstein’s residence to ensure it would be wiped off the map of Palm Beach,” Lawrence A. Moens, the agent representing Glaser, told the Palm Beach Daily News at the time. The lot was then sold in October for about $25.85 million to Matrix Partners partner David Skok.

This year also saw real estate heir Robert Durst sentenced to to life in prison for killing his friend Susan Berman. Durst’s harried history became infamous after he seemingly confessed to murder during a 2015 HBO docuseries, The Jinx: The Life and Deaths of Robert Durst.

Durst had also been suspected of killing his wife, Kathleen McCormack Durst, when she disappeared in 1982, and he admitted to killing Morris Black in self-defense in a 2003 trial in Texas.

Properties and deals that made an impression

The world’s most expensive home, a Roman villa with a Michelangelo Merisi da Caravaggio mural included, is being put on the market by the Italian government this fall for an outstanding $547 million, it was announced in October.

The outsized price reflects the mural’s rarity — it was the only one ever painted by Italy’s most famous baroque painter, and commissioned by the cardinal Francesco Maria del Monte in the 16th century. The home, currently owned by the Boncompagni Ludovisi family and protected by the Ministry of Culture, will go to auction for a starting price of €471 million on January 18, 2022.

Celebrity dermatologist Dr. Alex Khadavi brought another notable property to market this year when he listed his Bel Air Palazzo di Vista mansion for $88 million. The sale of the property would also include a $7 million art collection of rare and unique pieces curated by MDP Art Curators, including non-fungible tokens (NFTs).

“Obviously art and home go hand in hand and people that have the most expensive art collections are also buying the most expensive homes,” Aaron Kirman, the Compass listing agent representing the property alongside The Agency founder Mauricio Umansky, told Inman. “Real estate agents have to be on top of the latest trends to get our clients the highest prices. Right now, those trends include NFTs.”

On the rental side, a New York City penthouse made headlines when it was leased to a tenant for $85,000 a month. The 5,500-square-foot unit at the top of 1 North Moore Street has four bedrooms and spans three floors of the building, with panoramic views of the city.

Like the other properties previously mentioned, art also played a hand in the deal — with the property including pieces by Damien Hirst and Andy Warhol. Ultimately, the owners chose the tenants’ offer (which was less than the original $90,000-per-month ask) because they felt most comfortable entrusting them with the unit’s art collection, despite also having purchase offers upwards of $20 million The Real Deal reported.

Email Lillian Dickerson