New York’s largest residential brokerages have laid off or furloughed a significant chunk of their employees, The Real Deal has learned, as the firms and their thousands of agents grapple with a near-total market shutdown.
Douglas Elliman, the city’s largest residential firm with nearly 2,500 agents, laid off approximately 100 people on Friday, sources said. The Corcoran Group, the city’s second-largest firm with just under 1,700 agents, cut 50 percent of assistant pay and enacted across-the-board pay cuts in recent days, sources said. It also furloughed some staff, and suspended ad budgets for April. Terra Holdings, the parent company of Brown Harris Stevens and Halstead, said it would cut executive pay and furlough employees.
In an email to agents, Howard Lorber, chair of Elliman, and Scott Durkin, its president, described “meaningful budget cuts across the company.”
“We are not immune to the economic realities that the COVID-19 pandemic has brought to almost every sector of the world economy, including real estate,” they wrote. “By every measure, be it listing volume or closed sales volume, we are experiencing an unprecedented economic slowdown.”
Though Elliman said it intended to rehire employees once the economy stabilized, it also alluded to “additional operational adjustments in the future.”
Warburg Realty did the same, according to founder and CEO Frederick Peters, who said he furloughed up to a fifth of his 25-person staff about 10 days ago. The firm also cut personal marketing budgets and limited online advertising.
“Here’s what I’ve learned from difficult times,” Peters said. “You have to act fast.”
Across the country, many of the biggest firms have been bracing for April — when rent is due and deals from when conditions were normal would no longer be in the pipeline. In New York City, the virus has put an end to the spring selling season, with new listing inventory falling for the first time since 2007 and contract signings plummeting.
Last month, Softbank-backed Compass laid off 15 percent of its staff — or roughly 375 staffers — after projecting a 50 percent drop in revenue over the next six months. “We aren’t just facing an economic recession, we are facing an economic standstill,” CEO Robert Reffkin wrote in an email to agents at the time.
For Corcoran, the decision to cut back came from on high after parent company Realogy Holdings said last month that it would curtail marketing expenses, cut salaries and shorten work weeks to avoid layoffs. Realogy, which is also the parent of Sotheby’s International Realty and Coldwell Banker, announced that CEO Ryan Schneider would take a 90 percent pay cut and his direct reports would take a 50 percent pay cut.
Corcoran CEO Pam Liebman said the firm made “proactive and informed” cuts as it rides out unprecedented market upheaval.
“As the crisis continues to rapidly evolve, and demand declines in our markets, we are prioritizing actions that protect jobs and employee healthcare benefits,” Liebman said. “As we start to see signs of recovery, our goal is to quickly get employees back to work.”
Likewise, Terra Holdings said it would pay furloughed employees for at least a month so that they can keep their health insurance. The goal is to rehire employees when the brokerage offices reopen.
In a March 31 memo, Terra said executives would also take “significant pay cuts during this downturn,” effective immediately.
“This was not a decision made lightly,” said the letter, signed by co-owners Arthur Zeckendorf, David Burris, Kent Swig and Will Zeckendorf. “Understand we are making difficult decisions now which are in the best long-term interest” of the company, they wrote.
In a phone interview on Thursday, Halstead CEO Diane Ramirez said all of the residential firms were taking a hard look at their numbers.
“We have to look at this as pessimistically as we can so we can come out the other end strong and viable,” she said. “So much will hang on how soon we can get back to business.”
Sources said many firms are looking into rent abatement and deferments for brick-and-mortar locations. And some smaller firms said they planned to apply for relief under the federal government’s $2 trillion stimulus.
The Small Business Association has two loan programs, including one that provides loans up to $10 million to cover rent, mortgage interest, utilities and payroll. Unlike previous bailouts, the stimulus also offers unemployment insurance to freelancers and independent contractors, including agents.
Peters said Warburg is finalizing its application for an SBA loan, and he hopes to rehire furloughed staff. “It’s very hard and very painful. I love my people,” he said. “I’ll say to you what I said to them, which is, ‘The only reason I’d ever do this is to make sure you have a company to come back to on the other side.’”
He said it’s impossible to quantify lost commissions at this point. “We don’t know if the buyers will try to renegotiate. We don’t know if the buyer will walk away,” he said.
Bohemia Realty is also applying for SBA loans, including payroll protection, according to co-founder Sarah Saltzberg, who acknowledged some layoffs and salary cuts and noted that many of the firm’s 150 agents were in the midst of trying to apply for unemployment insurance.
“We’re basically applying for everything and then we’ll see what the best option is,” said Saltzberg, who added that brokerage was a thin-margin business even in good times.
But Saltzberg was confident of her firm’s resilience.
“When this company started before we were Bohemia, it was myself and a couple of other agents,” she recalled. “We would meet on a corner with a tupperware full of keys… So I know how to do business under a lot of different conditions.”