New high-end realty offices opening despite real estate downturn
Despite the tanking of the housing market, posh new realty offices have continued to open their doors, particularly in upper-priced Los Angeles-area communities where agents need only a few sales a year to make a living.
“The high-end market is less sensitive to a downturn in the economy,” said Stefan Swanepoel, who publishes the annual Swanepoel Trends Report analyzing changes in residential real estate. “That part of the market is less likely to require a loan for purchase. So there is still a lot of activity.”
Individual office openings and closures are not tracked by industry watchers, but the number of licensed agents statewide is followed by the Department of Real Estate.
Since hitting a high in late 2007, the ranks of California real estate agents have shrunk more than 20%, to 435,865 as of October, a level not seen in nearly seven years, according to department figures. Of those who remain four years into the market downturn, some have made a grass-is-always-greener switch to a new office.
“We have a merry-go-round attitude in the real estate industry because it is relatively easy to move to other companies,” Swanepoel said.
Deasy/Penner & Partners hasn’t been immune to agent dropout at its Beverly Hills sales office.
“Three or four years ago, everyone was in real estate — your sister’s aunt, your husband’s brother,” said George Penner, president of the real estate firm that specializes in homes of architectural note. “I think that shakeout has been good for the industry as a whole.”
Nevertheless, in May Deasy/Penner opened a new office in Pasadena and has brought in more than 20 agents, opting for mostly veterans with decades of experience.
The “boutique” firms, to use the real estate vernacular for independent offices, don’t want to be the biggest in terms of number of agents. They don’t use agent training as a way to generate revenues the way some larger chains do. Their goal is to have a few select locations and bring in only top-selling agents.
Timing the expansion during a struggling market helped Deasy/Penner attract seasoned agents, Penner said.
“When we are in a great market with sales booming, agents are content. There isn’t a need to change,” Penner said. “When the market isn’t as robust, the agents look for other ways to improve their business beyond just the market.”
While Deasy/Penner is focusing on small and select as the way to expand during a shaky economy, the Agency in Beverly Hills is thinking global.
The luxury boutique, which started up several months ago and has about two dozen agents locally, is in discussions to add offices around the world, said broker Billy Rose. Locations under consideration include Canada, Mexico, Asia and Europe.
Focused on the upper-priced end of the market, the company has been retained to represent the high-rise Solair condominium tower in Koreatown and the Ritz-Carlton Residences at L.A. Live.
Good agents tend to work at the same companies, real estate trend expert Swanepoel said. And it’s not uncommon for top-selling brokers who have been with bigger firms to strike out on their own when the franchise comes up for renewal.
“From a broker point of view,” Swanepoel said, “those who are already entrenched in their markets might want to go independent.”
Moving away from the layers of management common at larger companies was Partners Trust, where agents become partners in the company. It opened two years ago and now has offices in Santa Monica, Beverly Hills and Brentwood.
“As a young company we are very nimble,” said Nick Segal, president and a founder. “We don’t have to go through corporate overlays, we don’t need to be bogged down on executing ideas.”
Opting to go the franchise route, Sandra Miller opened the only Westside Engel & Volkers office two years ago in Santa Monica. The Hamburg-based, 30-year-old international real estate company has offices worldwide, something she sees as vital in positioning herself to tap into the growth in home buying by foreigners.
“Any time you are launching a new brand in a particular arena, you want to do it when the market shifts, because then you do get a seat at the table,” she said. “That’s why you see a lot of people opening their own shops. When the market is gangbusters, sellers will go to the norm.”
As an Engel & Volkers franchise, the office storefront looks just like its offices around the globe. This has not been lost on Roslyn Stewart, who chose the company and Miller to sell her mother’s Santa Monica house on the recommendation of her Thousand Oaks agent.
“I didn’t know about Engel & Volkers,” Stewart said. Then, traveling in Lima, Peru, and South Africa, she kept seeing its signs. Although that was heartening to her, she thinks the individual agent is still key.
“It reminds me of when my kids were little,” Stewart said. “It’s not so important which school you go to; what matters is the teacher in the classroom.”
But it’s not all upside striking out on one’s own. Marco Rufo operated a boutique realty firm in Pacific Palisades from 2003 until recently when he joined Prudential California Realty. Overhead and the costs of providing services to agents who weren’t producing much revenue were among his reasons for the change in the tough economic times.
“When the big boys are hurting, the little boys are going to be hurting worse,” he said.