2 min read November 2022 — Douglas Elliman Real Estate is one of the leading luxury brokerages in the nation and its origins date back to 1911. Invest: spoke with CEO Kevin Ahearn about the residential real estate market in Boston and the outlying areas, the company’s initiatives, and the current state of the market, including the outlook for the Boston area over the next five years.
What is Douglas Elliman’s footprint in the Greater Boston region?
We are in expansion mode right now. We have opened new offices on Nantucket, in Wellesley and earmarked another location in Boston. One of our biggest milestones as a company was the IPO, which took place in December 2021. Douglas Elliman is now publicly listed on the New York Stock Exchange as DOUG. This is a huge event and just adds to Douglas Elliman’s platform and DNA.
Do you think there will be a change in the number of professionals entering the real estate market in the next couple of years
No, there is a big push for more housing production all over Massachusetts. The real estate market during the pandemic put Boston, again, in the spotlight due to the fact that Moderna, a local biotechnology company, was instrumental in creating the vaccine to fight covid. We are fortunate because our market is resilient and, in some respects, it didn’t feel like we had a pandemic. The life science space experienced enormous growth. We have a tight landmass and high hurdles in the entitlement process in Boston. The real estate inventory is restricted by these dynamics and other factors. Our Weekly Reports and proprietary data demonstrate that we have had 10 consecutive first quarters where we had two months of inventory or less. Consequently, we have had a very dramatic upward pressure on pricing particularly from 2013 through 2022.
Do you think there will be a shift in 2023?
No. As part of our leverage report, I look at the weekly transactions and review how many are cash transactions. I have been doing this for 40 years working in the luxury housing market downtown. We recreated this leverage report going back to 2008-09 to better understand the percentage of cash transactions each week and the results are between 20-40% cash each week since 2008-09. The average price in Downtown Boston is a record at $1.33 million which increased by 9.8% in comparison to 2021; and the medium price, also a record, is $935,000 up 10% from 2021.
In MetroWest the top suburban housing communities of Wellesley, Weston, and Newton have also recorded record average and medium prices. Additionally, we have opened an office on Nantucket which is a big market for New York buyers. An interesting trend that occurred in the last few years and during COVID was the convergence in the market of all three locations Downtown Boston, MetroWest and Cape Cod and The Islands with dramatic upward pressure on pricing.
What strategies or initiatives have you put in place to attract and to retain new talent?
It is definitely a competitive brokerage market. When Compass opened up shop and essentially bought luxury real estate market share, it made the market more competitive for the top talent in residential real estate. Compass is a competitor across the United States with Douglas Elliman. The Douglas Elliman platform is in my opinion the top player in the United States in both general brokerage and new development. Additionally, their exclusive relationship with Knight Frank as a global player offers incredible reach across the world and is unparalleled. When I was thinking of selling my company, I identified Douglas Elliman as the top choice with whom to join forces and it was the right decision.
In your opinion, what is the outlook for Boston and the outlying areas over the next five years?
We have clients who have second and third homes in locations such as metropolitan Boston, Florida, Cape Cod and The Islands. They eventually retire and sell their property in the downtown or suburban markets and reside in southern climates, mostly Florida, and come back east to Cape Cod and The Islands in the summer months. Going forward, I don’t see much of a change in the trends on where our clients are going to spend their time, although we are watching downtown Boston reacting to the remote working phenomenon. The City of Boston is the strongest I’ve ever seen in my career. Recently, Boston was voted No. 3 in the United States for attracting international companies opening offices. We definitely punch above our population size.
There are new players in the class-A hotel space entering the market, such as Raffles, St. Regis, and a second Four Seasons hotel opened in Boston making it one of the few cities in the world with this distinction. Only 7-8% of our market is international. The Boston market has always been a combination of new construction and regeneration of obsolete or underutilized sites. The restoration activity is in the low-rise properties in the historic neighborhoods. The historic districts typically have maximum height guidelines of 65 feet, although it varies depending on the neighborhood and the specific site parameters. Based on the tight inventory and the tremendous demand for urban housing, we are finally seeing Boston embrace height in a few areas that typically is referred to as the “High Spine” and follows the major highways. A townhouse on Beacon Hill costs approximately $15 million – $25 million depending upon size and condition of the property and what the restoration costs will be. There are charming areas on parts of Beacon Hill with smaller footprints where total costs could run between $3-5 million but there are very few opportunities and there are multiple buyers typically circulating in the market.
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