Realogy plans to franchise Corcoran brand across globe
NYC firm will expand to “global megacities” starting with Miami
The Corcoran Group — one of New York City’s top residential brokerages with $21 billion in annual sales — is gearing up for a massive expansion.
Parent company Realogy Holdings said Wednesday that it plans to franchise the Corcoran brand beyond its stronghold on the East Coast to “global megacities” and leisure markets. As a part of the move, Realogy will also franchise Climb, a mobile- and tech-focused brokerage in San Francisco that it acquired in 2016.
“As the world has gotten smaller, we want to get bigger,” said Corcoran CEO Pam Liebman. She said it’s no longer about the “luxury triangle,” a reference to Corcoran’s presence in New York City, the Hamptons and Palm Beach. “We see how many international clients come to us in New York and ask us to service them in other cities. And we see how our core clients have homes in other parts of the country and world.”
Corcoran’s growth will be two-fold, according to Realogy, and will include new company-owned offices as well as franchises. The goal is to launch six to 10 new markets within 18 months, Liebman said, adding that the firm is already looking for office space in Miami.
The expansion comes at a time when residential brokerage is being squeezed by competition for agents and dwindling profit margins — two challenges that Corcoran and its parent company haven’t been immune to.
“Miami is the gateway city to a lot of countries, so we think it’s important to plant a flag here,” Liebman said, noting that its development arm, Corcoran Sunshine Marketing Group, has been active in the market. “We want to start here with a more boutique presence. We’re not looking to fill a bunch of desks.”
In addition to Miami, Corcoran is also taking a “hard look” at cities on the West Coast, as well as cities in Asia, Europe and South America, according to Liebman.
Corcoran (and Liebman) will manage and operate the new company-owned and franchise offices, according to Realogy. Corcoran Sunshine will not be franchised, and the company declined to disclose the franchise fees until certain legal documents are filed.
Founded in 1973, Corcoran has been a marquee brand for Realogy, which purchased it from founder Barbara Corcoran for $66 million in 2001. Today, Corcoran has 2,300 agents and 33 offices. The Corcoran umbrella also includes Citi Habitats, which mostly focuses on rentals, and Corcoran Sunshine, a new development powerhouse that’s currently marketing 38 projects with a projected total sellout of $22 billion across its markets.
But residential brokerage as a whole — Corcoran and Realogy included — has faced unprecedented competition for agents, forcing firms to pay higher commissions. One driver of that competition has been Compass, the venture-backed firm recently valued at $4.4 billion that’s on an aggressive campaign to control 20 percent market share in 20 U.S. cities by 2020.
Realogy — whose stock has been pummeled in part because of a housing slowdown and the high cost of commissions — has signaled that expanding its franchise business is one way it intends to compete.
In a phone interview on Wednesday with The Real Deal, Realogy CEO Ryan Schneider said despite the company’s broad reach, it hasn’t yet penetrated 80 percent of the U.S. market.
“There’s so much opportunity out there to grow our business,” Schneider said. “We’re excited to drive growth in these brands on the franchise side.”
With a market cap of $2.3 billion, Realogy already has some of the biggest franchise brands in the residential world — namely Coldwell Banker, Century 21, ERA Real Estate, Sotheby’s International Realty and Better Homes and Gardens.
This summer, Schneider disclosed plans to boost the franchise business. During an Aug. 3 earnings call, he said Realogy would add at least one franchise brand in 2019. Schneider also said Realogy is bankrolling programs to help franchisees recruit new agents. And for the first time, Realogy will permit franchise owners to own more than one brand.
As a whole, Realogy generated $1.82 billion in revenue during the second quarter — the largest portion of which came from its company-owned brokerages, known as NRT. But the franchise division, known as RFG, is growing more quickly than NRT and generated $237 million in revenue during the second quarter. RFG’s transaction volume rose 3 percent (compared to NRT’s flat sales) and the division’s average sale price rose 7 percent to $312,087 while NRT’s rose 2 percent to $537,748.
In a Sept. 9 research note, which followed a visit to Realogy’s New Jersey headquarters, analyst Anthony Paolone of JPMorgan endorsed Schneider’s effort to move beyond the status quo in an increasingly competitive landscape.
“The CEO was clear in that it is not good enough for [the company] to just defend what it has,” he wrote in the report. “It has to take risks with its brands, pricing, and technology in order to find growth in the future.”