How Large is the New York Apartment Broker Industry? We always hear that the non-agency mortgage-backed securities market is a $800 billion dollar market, based on notional value (that includes CMBS, for the purists). The whole loans market for outstanding residential mortgages exceeds $4 trillion in par-valued principal. The hedge fund industry once topped $2.6 trillion in assets under management. How about Manhattan apartment brokers?
First off, what do we mean by the size of an industry? We don’t intend to calculate the PV of all the brokerages in the city. Instead, imagine a world where no-fee apartment rental websites such as ours become incredibly popular. In fact, the sites are so popular that every broker today who makes any commissions related to apartment renting instantly sees his or her income drop to $0. How much total commission would be lost per year?
Method 1:Â Licensed Rental Agents * Average Annual Income
The first attempt at estimating the size of the broker industry is to figure out the total number of agents who make a living helping tenants find apartments. The advantages here are that we can cleanly capture the data by obtaining the number of licensed real estate salesperson and associate brokers from the New York Department of State. Then with a modest sample size, we can find out what percentage of agents work in rentals, and then determine the mean income each rental agent earns per year.
How many agents work each year in a full-time capacity, handling apartment rentals in Manhattan? Using our trusty eAccessNY tool for looking up licensed agents, plus some clever agent listings from key rental players, we conclude there are at least 3,000 rental agents working in Manhattan for a living (as in real analysis, we choose to lower-bound the estimate and show that the number fulfills our needs, rather than worry about careful estimation).
Now the more interesting number, what is the average rental agent income? I got some information after talking to broker who’s data I trust a lot (he runs a well-respected brokerage and personally trained over 100 agents). A good rental agent earns between $50,000 to $60,000 a year. While I didn’t ask for statistical details on the “good” descriptor, we’ll assume $60,000 is a one-sigma positive agent. He also said an “exceptional” agent makes $100,000, which I’ll peg as a two-sigma agent. As we know, this is hardly a normal curve, as the big skews are on the positive side, so told, I’ll estimate the mean at $45,000 annual income for a rental agent.
But when a rental agent earns $45,000 a year, that means he or she really collected at least $90,000 a year in commission, under the standard 50/50 commission split.  Sadly, there is even more. An in-house listing team can usually count on earning 5% per listing, meaning the actual annual commission collected per agent per year is closer to $90,000 / (.95) = $94,737, which we’ll round to $95K. The broker also told me that while some agents have successfully worked as hybrid rentals and sales, the vast majority stick with one or the other (sales being higher on the totem pole, but requires more relationship management and reputation establishment).
If our calculations are close to correct, we are concluding that the New York Apartment Broker Industry grosses at least 3,000 * 95,000 per year! Manhattan rental brokering has consistently been a $285 MILLION dollar industry! That lower bound excludes all the web designers, lawyers, database admins, property managers, accountants, and others, but the typically 50/50 broker cut can account for a lot of the overhead payments.
Can we really save New Yorkers $285,000,000 a year? That certainly is one of our goals, but first we’d like to suggest other methods that could approximate the same number, to be explored in the future…
Method 2:Â Apartments in Manhattan * Annual Turnover * Broker Utilization Factor
Method 3:Â Back It Out from the New York City Budget / Tax Factor
