Each month, LuxeSF profiles a member of The Luxury Marketing Council. This month we talked with Patrick Barber, Senior Vice President and Managing Broker for the San Francisco and Wine Country offices of the global powerhouse, Sotheby’s International Realty. Having essentially built the practice from scratch, Barber opines about the business, the city and the community that drives one of the most robust real estate markets in the country.
LUXESF: The Sotheby’s International Realty organization, how is it positioned in the marketplace?
BARBER: Sotheby’s International Realty is the world-wide leader in selling distinctive properties. To give you an idea, last year Sotheby’s sold more than 145 properties listed at more than $10 million throughout the United States. We also handled the most expensive non-commercial residential real estate transaction in the history of the state of California last year, which was the Cojo Ranch in Santa Barbara, listed at $150 million.
LUXESF: In how many countries around the world is Sotheby’s represented?
BARBER: We have more than 52 corporate offices and 470 affiliated offices in 29 countries.
LUXESF: The number of agents in the family?
BARBER: We’re very small in size. For example, in San Francisco, with some 45 agents, we had the highest per-agent gross sales of any company last year, and we also had the highest average sales price of more than $2 million. There is not a competitor in San Francisco averaging more than $2 million per transaction.
LUXESF: Let’s talk about the San Francisco operation that you run.
BARBER: I took over the office 10 years ago. It had been around for about a year with a manager who departed to start our Paris office, and six agents remaining by the time I arrived. My first year was a “trying-to-figure-it-out” year. But during those 10 years I’ve grown it from a losing proposition to just under a billion dollars in sales volume last year alone. We’ve got approximately 19,000 square feet of office space, and handle transactions throughout the Peninsula all the way up through Marin, Healdsburg, Sonoma and Napa, although San Francisco is our primary market. When I opened this operation, we were the 11th office, and now there are over 52.
LUXESF: From a corporate perspective, you are the Sotheby’s operation in Northern California?
BARBER: Besides Carmel & Monterey, we are the only other Northern California company-owned operation, including my three offices in the Wine Country.
LUXESF: You said there were 45 agents?
BARBER: Right now, there are about 65 agents in San Francisco, because we’re growing. I’ve just brought in a new team to handle new development projects. They’re the team that actually sold out the Palm, 140 South Van Ness and the Homes at Petrini Place .
LUXESF: Your own background — give us the highlights.
BARBER: I started in real estate while I was in college, working for a boutique commercial development firm in San Diego, which developed build-to-suit, research and development properties in Torrey Pines. I came back to San Francisco after graduating from college, and at age 21 started at TRI, which during my tenure was bought three times. We were TRI, then we were bought by Prudential, then by John Douglas, and then by Coldwell Banker. So, without ever leaving the confines of my office I got to experience four different residential real estate firms. Looking out over the landscape I realized that, as successful as we were, we were really leaving the business of real estate up to the individual agent to figure out. The epiphany for me was the realization that in a business where the commissions are so large, the companies need to be doing more, and they need to recognize that their client is the agent, as much as the agent’s client. That’s an important differentiation, and so I have taken a very agent-centric approach in how I run this business. Being in the top 1% internationally selling for Coldwell Banker/TRI, I brought with me the tools and understanding of what it is that agents need to do every day to remain successful. I dealt with the quandary of what do these agents do when they go on a listing and what do they actually need to successfully market themselves and their properties. I created the first comparative market analysis for the company.
Over the last 10 years we’ve come a long way. We’ve looked at the business and asked the question “How do I add value to our clients, the agents, who can then add value to their clients?” That means giving the agents the tools they need to truly differentiate the property. For example, some local companies think that marketing is a “For Sale” sign, an open house and a Chronicle ad. When I talk about local advertising, I talk about much more than that. Of course we’re going to do open houses, broker tours and advertising in the Chronicle, along with the Nob Hill Gazette, San Francisco Magazine, 7x7 Magazine, Northern California Home Design and the western edition of the Wall Street Journal. That’s just local coverage. Nationally and internationally, we’re featured heavily in Sotheby’s Previews Magazine which goes to 85,000 of the wealthiest clients buying at our auction houses worldwide, the International Herald Tribune and the New York Times. In all the major real estate markets, for example, Los Angeles, New York, Palm Beach, Jackson Hole, Santa Barbara, we’re advertising in those cities’ newspapers every single week. That’s an outreach effort and a network that we can drop into with our brochures and our advertising, and it’s a force that just cannot be reckoned with or matched by what I will call the localized real estate companies. We’re a local expert, but with a global reach, and when we take a listing, we take it to the world, and in so doing we know that we have gotten our clients the highest and best price. And the numbers bear that out. If you do a Multiple Listing search and just take the market in San Francisco, Districts 1 through 10, we’ve got the highest average sales price of over $2 million last year.
LUXESF: Let’s segue into the San Francisco market. What do you think about the market going forward?
BARBER: When you look at San Francisco general statistics, the number of foreclosures, etc., it looks much worse than it actually is because there are outlying areas like Excelsior and Hunters Point that were propped up with sub-prime paper. It’s those other areas that are skewing the statistics. Right now, if you culled the statistics, they’re not even that bad relative to the Bay Area. But if you look at the market as microclimates, for example, District 7, which incorporates Pacific Heights , Presidio Heights, Cow Hollow, the Marina, District 8 which includes Russian Hill, Telegraph Hill, Nob Hill, or the Lake Street Corridor, the Richmond, the Sunset, you’ll see that the market is still stable. Volume is certainly down because not that many people are moving up or moving down. They’re just holding tight, which is understandable. There is good job stability here in San Francisco, so you’re not seeing that much movement. People aren’t trading up like they were the last 10 years. But demand, because of the tight supply, has remained constant, so you’re still seeing a small increase in prices. I don’t know how long you can have this phenomenon of falling volume offset by raising prices but eventually I think there will be an evening out. For now I would say that the underpinnings of our market are very strong, especially when you get to the better neighborhoods and the higher-end.
LUXESF: In the next 5 to 10 years, where do you see the opportunities in the Bay Area?
BARBER: Today I see the opportunities in some of the second home markets, especially Wine Country … Sonoma, Healdsburg and Napa. Those markets have been unfairly battered because a portion of that population, representing the worker bees, was hit by the sub-prime market mess. That’s hurt the basic perceptual underpinnings of those markets causing enough uncertainty that second home buyers are saying, “Well, let me concentrate on my primary home right now.” We’re seeing a lot of our clients stepping up big on their principal residences, upgrading to much bigger homes. They’re saying, “There’s no real reason for me to rush into buying a second or third home in the Wine Country because, quite frankly, that market is not going anywhere.” So, in a market that’s been hurt 35% to 45%, there are some real opportunities up there right now to buy property.
Another trend is that we’re seeing more of our clients having three and four children instead of the traditional one or two, so the bigger home is somewhat of a necessity.
In the short term, look at the good secondary home markets and solid markets where people want to live. I would obviously stay away from markets where they can continue to keep building, like the Fremonts, and areas where there is more dirt than there are jobs or quality-of-life reasons to live there. But if you look at places like Sonoma, Napa or Healdsburg where there is always going to be a Town Center, there’s always going to be a wonderful sense of community, great restaurants, and a wonderful lifestyle, people, particularly baby-boomers, are going to continue to flock there and that offers tremendous opportunity.
Long-term, over the next five or ten years, when you look at San Francisco specifically, and remember that we’re talking about a little peninsula here, seven miles by seven miles, 49 square miles in all, with a sizable portion of that being Presidio, parks, areas where you just can’t build or live, or that inhibit or prevent growth because of local politics, it’s only going to make single family residences more valuable. I think you’ll continue to see single family homes go up in price. The question mark, long-term, is the relative increase in value of the condominium market and high-rise developments because there will be more and more of those being built. People are currently paying an average of $1,000-$1500 per foot. Are those numbers sustainable when you talk about adding 20,000 new units over the next five years? Yes there are some incredible buildings to choose from, and solid reasons to be in buildings like the millennium, Four Seasons, Palm, Infinity, St. Regis and more. When looking to buy in buildings with fewer amenities and quality finishes, as a long term investment, I would encourage looking at alternatives like being in an Edwardian flat for the same price per square foot, with a bit more charm, and in a more established neighborhood … it is not as easily duplicated and in a tough market you won’t have to compete with several of the same floor plans on the market at the same time.
LUXESF: If there was a primary marketing strategy that you employ, other than the emphasis being on the agent himself/herself, what would it be?
BARBER: Most serious buyers are working with successful, qualified, agents, so any marketing plan obviously has to reach out to the brokerage community. I’ve prided myself on reaching out to agents from every single company in San Francisco so that we now have an incredible working relationship with all of those companies. Don’t forget, statistics show that over 70% of the buyers come through another brokerage or agent. Those relationships, our level of respect in the real estate community, and how we as a firm, our people as agents, and I as a broker treat other agents and brokers are crucial elements in our culture and our marketing. Whether it’s good news or bad, I always pride myself on making sure that we’re working it out to the best interests of everyone concerned.
LUXESF: But when it comes time to allocate the budget, where do you place the emphasis?
BARBER: Clearly the #1 spend, company-wide, is in print media, newspapers and magazines. We’ve also begun moving money away from traditional print advertising into online relationships with Google, Yahoo, Openhouse.com, Zillow, Realtor.com, etc., because the internet is the first stop for prospective purchasers and sellers.
LUXESF: What do you look for when you’re recruiting agents?
BARBER: I look for a full-time, ethical, hard-working, business-minded individual who understands the importance of knowledge and client care, business development, negotiation, general construction and the price-value equation.
LUXESF: Are those hard to find?
BARBER: Yes, but in San Francisco we are extremely fortunate as there is an incredibly talented pool of real estate professionals. There is not a company in San Francisco that does not have a real estate agent that I do not admire. There is talent in every single firm. And I’ve tried to build a firm where I will attract those types of individuals exclusively.
LUXESF: Let me rephrase the question. What defines a successful agent in your eyes?
BARBER: From an agent’s perspective, I would say it’s someone with market knowledge and client control; someone who has the ability to truly understand property values, the importance of marketing both locally and worldwide in our increasingly diverse area, and who has client control, meaning that when they list the property they know that the client is educated and realistic; that when they bring a buyer they know that that buyer is going to perform because of the hard work and education provided by the agent who represents them.
LUXESF: Do you see any difference in how the business is practiced, outside of the internet and technology playing a greater role?
BARBER: The expectation level has risen because of how available we all are with Blackberries, voicemail and email. An immediate response is expected. And yet, in spite of how much information is now available for public consumption, a trend that I’ve seen over the last few years is the number of quiet, private transactions that are taking place. We’re seeing significantly more confidential and private sales now, than at any other time.
LUXESF: The importance of the luxury customer to Sotheby’s. I assume it’s the primary thrust of your business?
BARBER: We don’t define it as a luxury sale. We know that every deal is a big deal to those involved. To Sotheby’s and to my agents, it’s not a dollar transaction; it’s a client service transaction. Whether it’s a $500,000 deal or a $10 million deal, we’re going to have to do the same amount of work, and so we’re going to provide the same degree of attention.
LUXESF: But, by your own admission, if you’ve got the highest average sales price at above $2 million, doesn’t that indicate an emphasis on a more affluent buyer and higher priced listing?
BARBER: The interesting thing about that statistic — even though we have the highest average sales price, company-wide the majority of our transactions were under $1 million.
LUXESF: You’re talking about the whole Sotheby’s system …
BARBER: The whole company. With that being said, there is no other company so strategically placed to attract buyers and sellers literally around the world than Sotheby’s International Realty — whether it’s in the Hamptons, in New York, or in San Francisco. We truly are the world-wide leader, so we do obviously focus our marketing efforts on the high-end. With that being said, we don’t differentiate among our clientele.
LUXESF: So if it were a quality listing at $500,000, you’re not going to knock it back?
BARBER: Of course not. Frankly, almost everything in San Francisco is distinctive. What I like to say is we sell distinctive properties in all price ranges.