In my humble opinion, then, an overriding question for the industry is how can this strategy be realized when the traditional revenue drivers are under constant attack? Even when the current challenges of fewer transactions and lower sales prices are in our past – whenever that day comes – the average brokerage will still be faced with ever-shrinking broker commission rates and ever-increasing splits. Most brokers have already cut costs to the bone.

The one major cost area left, for most, is office space.

Somehow, I believe, this ties into the overall picture. The rebirth must involve a rethinking of space.

If I start with the RealTrends study you cite (which was based on ‘07 data)and work in a few assumptions, my best national estimate is that we’re now at about 10% of GCI, possibly higher. The more telling metric, at least I think, is that this would represent about 1/3 of the company dollar (or gross profit), which is a more important number for the broker to measure off of.

If my estimates are right, this percentage has probably gone from +/- 25% of company dollar to +/- 33% in little over one year.

I have some other thoughts but don’t want to steal our own thunder (if that’s possible) as we’re putting the final touches on our take on the topic that we’ll write about really soon.

Keep your promises is really key to any brokerage of the future, the consumer will demand it.

Since you’ve reviewed thousands of brokerage financials, what % of a broker’s expenses is taken up by facilities cost (occupancy costs for office space)? The now-outdated RealTrends Broker Performance study had leasing costs at single-digit % of GCI from what I remember.

I don’t think that’s going to be the solution, frankly, when 100% agent split models are taking over the industry.

But I may have bad data on this one. Can you supply us with better data points on occupancy expenses, expressed as % of GCI, that the average brokerage spends?

Thanks,

-rsh

I’ll fix now.

As for what you are thinking through – consider your brand the hub of wheel. Consider every agent, every email, every signature file, every promise, every everything that comes from it a spoke that serves to connect your hub to the tire that is the consumer. If one spoke is wobbly, doesn’t fit. etc., you jeopardize whatever it is that wheel is carrying. In this case, your brokerage.

marc

I apologize for bringing up such a trivial detail in the wake of a post of this magnitude: your twitter username link has a typo: it points to the non-existent 100wattconsulting

Over the course of the last 9 weeks I have visited many operations. Some occupied 36,000 square feet, others in 16,000 square feet and some in 2,000 square feet.

I have also visited with companies with many locations spread all over town. Some brokerages are stuck with long terms leases, others own the buildings – but all feel the need to somehow consolidate these holdings, shrink down and rethink their strategy.

Overall, it was hard not to notice the big waste of space and many empty cubicles and not view them as they are – black holes sucking green matter right out of their wallets.

The longer this continues, the harder it will be for these firms to correct themselves.

IN 2004, I attended a RISMedia conference with my tablet computer and dashboard e-signature software in hand. While in the audience I asked the panel of Broker CEO’s (Dottie Herman, Lennox Scott, others) if they saw brokerages continuing to grow their sq footage as they have been or resizing down into small offices that offer hoteling and paperless solutions.

They saw palaces in their future. And snickered at the notion of paperless.

At the time I thought that odd considering this panel, led by Stefan Swanepoel, included his presentation illustrating the history of real estate with all its cyclic ebb and flows which are so richly ingrained in real estate’s past.

They did not.

Side note: That same year, Brian and I put together an analysis/idea which we presented to the SoCal NRT group regarding this very issue. Betty Graham and her crew took the baton and launched this – 2005. I think they and others should have done this all over the country.

http://www.youtube.com/watch?v=KrViEmbEX7k

Today’s brokerages did not pay attention to their own knowledge. They disregarded their own data. And the reality that history will repeat itself.

They occupy Neverland Ranches. Many are in default.

The future brokerage, I think, will proceed based on something other than ego, flashing faux wealth and tunnel vision.