Brokerage bloat: Analysis ranks Compass, Anywhere among least efficient

Mike DelPrete examines residential firms’ scramble to get lean

From left: Anywhere's Ryan Schneider and Compass' Robert Reffkin (Getty, Compass, Anywhere Real Estate)

From left: Anywhere’s Ryan Schneider and Compass’ Robert Reffkin (Getty, Compass, Anywhere Real Estate)

Compass and Anywhere are among the least efficient publicly traded residential brokerages, an analysis by Mike DelPrete has found.

As residential brokerages look to cut costs, those two may have to make the deepest cuts, the influential real estate tech observer concluded.

DelPrete, a scholar in residence at the University of Colorado Boulder and an investor in real estate startup Side, looked at how brokerages’ revenue compared with their operating expenses.

He found eXp to be one of the most efficient firms: It generates $10.86 in revenue for every dollar of operating expenses, versus Anywhere’s $3.84 and Compass $3.71.

Compass, which by DelPrete’s count has laid off 1,700 employees since June, is looking to trim $600 million from its annual budget. Compass has not released its layoff total. Anywhere was the only firm DelPrete examined with operating expenses over $400 million at the end of the third quarter.

“Cost reductions limit a company’s ability to invest in future growth opportunities,” DelPrete said. “Other companies operating more efficient, low-cost operating models are under less pressure to make big cuts — and may be better placed to invest in future growth.”

According to DelPrete’s analysis, Compass trimmed less than $100 million from its budget between the start of its cost-cutting program announced in August and the end of the third quarter.

It’s unclear how much progress Compass has made since then because it hasn’t released fourth quarter earnings, and its most recent round of layoffs just happened this month. The financial impact won’t be known until the company releases its first quarter earnings in April.

Anywhere and Compass declined to comment.

Compass said after its January layoffs that it wouldn’t need to cut headcount further to reach its cost-cutting goals. The brokerage has sought to reduce expenses to conserve cash and become profitable.

Anywhere, which has been on a years-long odyssey to cut expenses, also announced a round of layoffs earlier this month and let Coldwell Banker CEO Ryan Gorman go in December.

Other companies have cut much higher percentages of their staff. Ribbon, a homebuying startup, has laid off 85 percent of its employees since last June, and Flyhomes, Knock and Homeward have all laid off more than Compass’ 40 percent. Anywhere slashed about 10 percent, according to DelPrete.