Survival of the slimmest: TRD looks at the future of the residential brokerage
As agencies adjust to the new reality, here’s what’s in and what’s out
In early April a dejected-looking Kurt Wisner posted a video in front of an empty van.
“I’ve got a van parked down here by the L.A. River and it’s Tuesday,” said Wisner, a Compass agent who runs the Courtney & Kurt team. “Tuesday is typically a day where we do our broker caravan.”
“We tell stories, we tell jokes, and it’s just a great time to be human,” Wisner said to the camera. “But today, as you can see, the van is empty.”
L.A. residential real estate agents lost a fundamental part of their routine when statewide orders issued in March shut down the weekly home caravan tours as well as Sunday open houses.
The stay-at-home orders Gov. Gavin Newsom issued are now five months old.
Throughout this unprecedented disruption to the norms of residential real estate, brokers have tried to stay positive. They’ve discussed “pent-up demand” and how the Covid-induced recession has let them learn new skills, and freed up time for phone and Zoom calls with clients.
When sales fell in April and May, such optimsm seemed like public relations damage control. But now sales really are up — 22 percent in L.A. County year-over-year for July, with sales records being set nationally, according to National Association of Realtors figures. Brokers made adjustments big and small that were unthinkable in February.
“There’s layers we’ve been able to peel off,” said Tami Halton Pardee, CEO of Halton Pardee & Partners.
What has stayed and what has changed may come as a surprise. Here’s what’s in and what’s out for residential brokerages in L.A. and elsewhere:
In: Managing the virtual office
When offices shut down in March, many agents, ironically, turned to their office manager.
“My manager has been really good at navigating the different reality that we have had,” said Alicia Dry Cohen, an agent at Nourmand & Associates. Cohen says her manager, Carolyn Rae Cole, has “kept us up to date on issues like applying for unemployment and contract verbiage.”
Office managers including Howard Lorey of Nourmand & Associates swear they’ve done more work during the pandemic. “My job has been more intensely busy since March,” Lorey said. “I am helping agents redefine their roles.”
Spencer Krull, manager broker of Side’s Southern California offices, said he’s spent an inordinate amount of time providing legal guidance to his agents.
“The big difference now is that managers are supposed to be experts in government orders from the state, counties, and cities,” Krull said. “Agents are asking questions like, ‘How long do I have to wait to do the showing if the seller was exposed to someone with Covid?’”
To an outsider, the facilitative role of office manager — with no sales track record, or leadership decisions — is hard to measure.
When Compass laid off 15 percent of all its employees in March, a notice filed with the California employment department revealed that managers of various titles — agent experience, construction, strategic growth, associate marketing — got a pink slip.
But office managers interviewed say those positions are not like managers at other brokerages (numerous messages left with Compass went unreturned). Traditionally, there is one manager per office, and they are jack-of-all-trades, doing “sales training, contract, deal doctoring, legal, and administrative,” said Colin Keenan, vice president and general manager of Westside Estate Agency.
The majority of brokerages maintain the practice of one do-it-all manager per office. But some bigger brokerages created an alternative of specialists, a strategy Keller Williams is credited with pioneering. The Austin-based brokerage began shifting 15 years ago from all-purpose managers to specialists with specific tasks like legal compliance or accounting.
“Keller Williams moved to specialists, and Compass has adopted some of that model as well,” Keenan said.
Both brokerages have managers focusing on one area, like an accountant who handles the books at multiple offices.
But big brokerages’ experiments with the office manager role seems to have hardened boutique shops’ resolve in sticking with the do-it-all manager.
“As a deal doctor, legal liability navigator, and sales trainer, office managers are imperative to working in today’s market,” said DJ Grubb, broker of Oakland boutique Grubb & Co.
Out: The physical office
Brokerages are — slowly — reassessing their physical presence.
Coldwell Banker, the top L.A. County residential brokerage by sales volume in 2019, made office cutbacks amid the pandemic, though Jamie Duran, the firm’s Southern California president, said the firm has “no plans for closures for the foreseeable future” at the 61 offices it leases in Southern California.
Meanwhile, Coldwell Banker’s national rival, Keller Williams, is openly rethinking office space.
“The market center of the future will almost certainly consist of smaller physical footprints,” said Matt Green, director of growth for Keller Williams. “Covid and other market shifts we have experienced continue to show us that office space isn’t core to our value proposition.”
“When agents need to cut costs,” Green added, “Office space is one of the first things to go.”
Sill, Keller Williams has not announced office closings amid the pandemic.
“You are not a very good real estate broker if you are in the office anyway,” said Suzanne Hollander, professor at the Jerome Bain Research Institute at Florida International University. “Many agents just collect their commission check, and fill out some paperwork there.”
Despite that, Hollander noted, brokerages from Fisher Island to Beverly Hills have spent millions of dollars on glamour offices.
Realogy, the parent company of Coldwell Banker, Corcoran and Sotheby’s, listed $491 million in operating lease assets in its latest SEC quarterly report (down from $515 million at the end of 2019).
Coldwell’s portfolio of over five-dozen California offices include leasing a whole floor at 166 N. Canon Drive in Beverly Hills, an office building in the heart of the tony “90210” ZIP code.
Within walking distance are offices rented by Compass, The Agency, Hilton & Hyland, and Douglas Elliman among other brokerages.
According to the L.A. County assessor’s office, the building Elliman rents at 150 El Camino Drive has a market value of $40 million. Elliman glammed up the space, and used it on reality TV to market the brokerage, a practice employed by other shops like Oppenheim Group, and its West Hollywood office.
But when the cameras shut off, offices play a small role. “Over the past five to 10 years, I’d say the majority of agents spend their time working from home or Starbucks, so a lot of the day-to-day has been over the phone for a while,” said Krull of Side.
Agents interviewed basically said the same. “The atmosphere and camaraderie there can be great,” said one agent. So great that the agent comes into the office, “Only when I have to.”
Side is distinctive for making agent teams bear the cost of office space. But other brokerages may also find alternatives to the traditional office lease.
Pardee noted her brokerage owns offices in Venice and Culver City on L.A.’s West Side. “That’s what brokerages should do, buying our own buildings,” she said.
Halton Pardee & Partners does one lease one office building in Palm Springs, but the broker says that office might not be worth the trouble. “We are looking to go down from three offices to two,” Pardee said.
In: Matterport tours — Out: The caravan
A key layer Pardee has peeled off is physical sales departments. The broker furloughed two staff members who work on physical sales, and sold one of the two trucks used to transport brokers and “got rid of” most physical advertising.
Other expenses associated with caravan tours and open houses were also jettisoned.
“These were events where everyone got dressed up and it was a time for agents to interact with each other,” Krull said.
Sometimes the price of a home could be discerned by the open house spread. “Some would have cookies, some would have champagne and cookies, and some would have champagne and sushi,” noted Hollander, the real estate professor.
Virtual tours have replaced open houses as the entry point to a new house on the market for brokers and clients alike.
The Sunnyvale, California, company Matterport, which makes immersive 3-D technology, has become an adjective and verb in the brokerage world just as Zoom has for many other businesses.
“One thing we added was Matterport tours,” Pardee said. “We can actually walk people through the house.”
Like other brokers interviewed, Pardee has seen such adjustments — teaching agents a whole new technology, and the structure by which a home comes onto market — as just another cost of doing business.
Residential brokerages could be given a credit as a flexible and resourceful business — or one that used a global catastrophe to learn what was really essential to selling homes.
“It’s a people business,” Hollander said. “But communicating virtually you can establish some of those same relationships.”