Compass laid off 15 percent of its staff on Monday, The Real Deal has learned.
With the economy reeling from the coronavirus pandemic, the Softbank-backed brokerage said it was 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. “The best we can hope for is a V-shaped recovery as opposed to an extended recession.”
In the letter, Reffkin said Compass took steps over the past week to reduce costs before announcing the layoffs — many of which took place via video because of social distancing.
“Today was not an easy day for Compass,” he wrote. “While the timing of the economic recovery is uncertain, we are certain that by making these hard decisions today, our company’s future is secure.”
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Compass to scale back lending programs
After raising $1.5 billion from investors, Compass ended 2019 with 15,500 agents and 2,500 staffers nationwide. The layoffs cost roughly 375 staff members their jobs.
In January, it laid off 40 employees across IT and marketing. Although billed as part of a reorganization of roles that service agents, Compass was increasingly focused on profitability, sources said.
Since late February, however, the coronavirus pandemic has tested the global health care system and wreaked havoc on the economy. The stock market has plunged by 30 percent and workplace closures — imposed to slow the spread of the virus — has sparked layoffs across multiple sectors.
In Reffkin’s letter, he said showings dropped by more than 60 percent as residents of major cities, including New York, San Francisco and Los Angeles, stayed home en masse. “We are modeling a six-month decline in revenue of 50%,” he said.
In addition to the layoffs, Reffkin said Compass paused corporate marketing and scaled back its concierge program, which fronts money to sellers for repairs, by 80 percent, “significantly reducing corporate expenses and office costs and halting all non-essential projects.”
He also said he would forgo a salary, and Compass’ executive team would take a 25 percent pay cut.
Founded in 2012, Compass was the No. 3 residential brokerage in the U.S. last year thanks to explosive growth across high-profile markets. The brokerage, valued at $6.4 billion by investors, sold $88 billion worth of real estate in 2019, up from $45.5 billion in 2018.
In October, Compass CFO Kristen Ankerbrandt told TRD the company was expecting revenue of $2 billion and run-rate revenue of nearly $3 billion in 2019.
Even before the coronavirus pandemic, however, Compass was facing scrutiny over its valuation and profitability after WeWork’s botched IPO.