Four takeaways as Elliman charts the course ahead

Douglas Elliman is betting it’s true that slow and steady wins the race. 

The company hasn’t taken major leaps in recent years like some of its competitors who grew headcount aggressively or jumped into iBuying ventures, but it has avoided the massive losses that beset the world of brokerage in 2023.

Elliman’s losses jumped in the fourth quarter, but the brokerage enjoyed a relatively paltry net loss last year of $5.6 million. While investors would surely prefer to see a profit like the one it posted in 2021 (nearly $100 million), the damage last year pales in comparison to Compass ($602 million), as well as Anywhere ($287 million), which was among the players to shutter iBuying operations. 

But there could be storms on the horizon for the legacy brokerage. Compass insists it’s around for the long haul, with plans to be cash flow positive by June, and brokerages like The Real Brokerage and eXp have reported consistent growth with substantially lower overhead. Market conditions also pose problems, particularly with agent retention. 

Here are five takeaways from the firm’s annual report that provide a look at the course ahead for Elliman. 

Territory and Service Expansion

Elliman plans on continuing its expansion kick. It has plans to expand into Tennessee, North Carolina and South Carolina this year, according to a map in its investor presentation. Out West, it’s set its focus on Arizona and Utah.

The firm expanded last year, entering Washington, D.C. with three offices and its first in Las Vegas. Along with opening its second in Boston, the brokerage grew its office count outside of New York, Florida and California to 23 last year from 14 in 2021. 

It’s also planning to launch new services, including a staging service, a renovation service and a security service. 

Dip in retention

Elliman wasn’t immune to the realities of last year’s down market. Its retention rate fell to 87 percent last year, the first time it’s fallen below 90 percent since at least 2019, according to its investor presentation. 

It’s not the only company struggling to hold onto brokers: Compass’ headcount growth has sputtered and likely weighed down its retention, according to its own annual report. 

Firms are likely struggling to retain agents who are looking to switch companies in down markets to secure a fat signing bonus to see them through a dry spell. High churn could pose a short-term revenue problem, though the company reported it grew its broker count by roughly 400 last year.

Better splits 

The commission split Elliman has with its brokers became slightly more favorable for the firm last year. Elliman paid an average of 72.6 percent of its revenue to agents, down from 72.8 percent in 2021. While it’s not much of a decline, it stands in contrast to the situation at Anywhere, where executives said splits are likely to keep rising. 

Anywhere paid out 80.2 percent of its revenues in commissions last year, according to its earnings report, up from 78.9 percent the year before. Executives at the parent company of Corcoran, Coldwell Banker, Century 21 and Sotheby’s International Realty said the jump was due to top brokers selling a greater percentage of homes during the down market — a trend that didn’t appear at Elliman.

Market Share

A potential area of concern is the fall in market share in New York’s suburbs, which encompass Westchester County and all of Long Island. Elliman’s piece of that market fell to 15 percent last year from 20 percent in 2017, even as it grew its share of all its other markets. 

It’s unclear exactly why Elliman’s share has fallen, though it’s likely due to increased competition in the area. 

Compass last year expanded its presence in Westchester and the North Fork, while a Corcoran franchise acquired a 16-agent brokerage in the area. The market has regularly attracted some of New York’s biggest names in recent years, with Compass acquiring 100-agent firm Platinum Drive Realty in 2020, beating out interest from Elliman and Coldwell Banker.

A representative for Elliman declined a request for comment.