Bond & MarkDavid Enter CRE
A: More a sign of the changing times. Make no mistake about it, if the future was bright for residential sales volume in Manhattan there would be no need to expand your business model into a sector (commercial) that is hurting big time right now! Either you innovate, or you cut costs, or you get more production via more agents, or you expand into new markets to get that extra production! I would not look at these moves as a sign the commercial sector is getting hot - its not! In fact, its very very depressed. Rather, these moves are a sign that new revenue must be squeezed from somewhere, and commercial is the closest and most likely match. Whats amazing to me is the lack of innovation or even the lack of interest to innovate in this marketplace! If there is one thing consumers should expect from a good old fashioned slowdown, its innovation that benefits them! If the big boys don't, somebody will; trust me! Streeteasy.com already innovated their way to basically solve the public MLS problem for Manhattan real estate - so what's in store for the brokerage model?
Via The Real Deal:
Bond Launches Commercial Division
The expansion wasn't the original plan. In the midst of this fall's economic fallout, Ricciotti said, Bond was considering closing the 19th Street office, which is the oldest and smallest of the company's five offices."We thought, 'if we're going to cut any expenses, why not that one?'" he said.
Instead, Gerage approached them about joining the company and almost immediately became "a raging success," Ricciotti said, by specializing in sales of mixed-use buildings priced between $5 million and $20 million. Gerage brought two agents from Coldwell Banker and hired several more, and the office is now overcrowded, necessitating an expansion of the 53-desk office, Ricciotti said
"We were very excited, and rather than take a step back to cut expenses, we increased revenues instead," Ricciotti said.
MarkDavid Enters Commercial Market
"We decided to expand because a lot of people we helped find apartments were looking to start businesses and asked us to help them," Fromm said. "We used to refer them out. Since we have relationships with landlords who have retail and office space, we were able to put deals together."These are not stupid moves and they are not unexpected moves. It's very clear that the times, they are a-changin'. And change is happening. It will continue.
The change thus far has been on the brokerage side of the model - that is, reduce ad budgets to brokers, shutting offices, canceling perks and holiday parties, eliminating food deliveries for sales meetings, tightening split levels, weak performing marketing cutbacks, etc..
We are yet to see any change in the actual business model that benefits the consumer! I see the Rutenberg Realty 100% Agent Commission Model as attracting more and more brokers because less deals doesn't necessarily have to mean less income - giving a boost to the virtual realty's 'rent-a-desk' transaction model that benefits agents. I also see the Thomas Demsker flat fee sell side consulting model over at NoBrokersPlease.com. A step in the right direction. It wont be long for more innovation to come out focusing on the consumers and making transactions more efficient and making market trends and valuations more transparent for all - after all, what the heck is really going on out there? Time will tell, but I have a feeling this industry will be vastly different in 2 years time.
I wonder how prepared the big boys are, especially after seeing Realogy post a $260M net loss for the 1Q. I would expect Q2 to be significantly improved though, as the 1Q represented the after-effects of a frozen 4th quarter, but the long term prospects continue to be very pressured. I just don't see sales volume getting anywhere close to what we got used to in 2007 (I see sales volume below trend for a number of years) and if borrowing costs rise further, it will continue to be a drag on the company's ability to squeeze out maximum profits.
