REAL ESTATE OFFICE DYNAMICS

What is REAL Trends bench-marking data saying about office dynamics?

by Scott Wright, manager of business analytics

Over the years, the real estate industry has seen radical changes to office dynamics. An update of our benchmark matrix offers a glimpse of just how much things are changing.

In last month’s newsletter, I wrote about the ongoing downtrend in the percentage of Gross Commission Income (GCI) retained. This trend may seem alarming, but since brokers are in the business of making money, they’ve ramped up GCI earned per office. Couple this GCI surge with smarter spending and many brokers were able to make 2015 one of their most profitable years ever.

As it turns out, the formula for this per-office GCI surge is a rather simple one. Naturally, there’s the macro factor of home price appreciation, but the biggest factor is a major increase in agents per office. Since 2012, REAL Trends has seen a whopping 43 percent increase in average agents per office, from 53 to 76.

There’s simply no better way to increase GCI than to boost agent count. Agents are the No. 1 asset for all real estate brokerage businesses, and brokers have been on a recruiting spree as they seek to increase agents per office.

Of course, having a higher per-office agent count will only translate to an increase in revenues it the agents are productive. And, productive they’ve been, with an average per-office increase in sides and volume of 48 percent and 35 percent respectively.

Since these sides/volume increases are on par percentage-wise with the increase in agent count, it’s evident that agents haven’t been any less productive. In fact, as you can see in the chart, there’s been a slight uptick in sides per agent, from 8.9 in 2012 to 9.2 in 2015.

This per-agent increase in closed transactions in a smaller workspace may seem counterintuitive by conventional standards. In many industries, a crammed workspace and inaccessibility to the right workspace would have an adverse effect on employee satisfaction and, ultimately, productivity but interestingly this is not the case in the real estate industry.

Earlier this year, I toured several offices of a large, successful brokerage company in the Midwest. I was astounded by their agent and office dynamics. Incredibly, there were some offices with an average-desk-space-per-agent of less than 30 square feet, with one of its larger offices housing agents at a staggering 15 square feet per agent.

With this kind of workspace, you’d expect to walk in and find a group of sour agents grumbling like cattle in a pen. Rather, what I found was an agent population that couldn’t be happier.

This company had the foundation of a very strong culture, so ultimately I wasn’t too surprised. What it drove home for me is that the traditional workspace paradigm doesn’t apply to this industry.

A real estate agent’s office is not a cubicle with a land-line telephone, but rather a smartphone and tablet. More sales associates are working from home, cars or a coffee shop. As long as they have the support of a physical office that gives them access to a conference room, supplies and marketing materials, they’d rather function in a more agile work environment outside of a cubicle.

These shifting office dynamics allow brokers to assign more agents per office, which ultimately  allows them to operate leaner and generate higher per-office profits.^

This article originally appeared in the August 2016 issue of the REAL Trends Newsletter is reprinted with permission of REAL Trends, Inc. Copyright 2016.

The Minnesota REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s