Heavily-funded New York-based real estate brokerage and tech startup Compass today laid off 15% of its staff, or about 375 employees, due to economic impact from the COVID-19 outbreak.
Compass CEO Robert Reffkin said the company is expecting a 6-month decline in revenue of 50 percent. It has seen a 60% decrease in home showings, according to the company’s data, as social distancing mandates are enforced around the country and the stock market plunges.
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“We aren’t just facing an economic recession, we are facing an economic standstill,” Reffkin wrote in an email to employees (full email below). “Many parts of our economy will be completely shut down for months. As a result, our country will likely have gone from a healthy level of employment to more than 10% unemployment in a month, faster than any point in our lifetime. This will almost certainly result in a recession. The best we can hope for is a V-shaped recovery as opposed to an extended recession.”
The Real Deal first reported the job cuts.
SoftBank-backed Compass, which has raised $1.6 billion, opened a large new Seattle tech center this past September, right in the middle of Amazon’s headquarters campus in the South Lake Union neighborhood.
The 7-year-old company declined to comment on the number of Seattle-specific cuts. Compass has hired nearly 100 product, engineering, and design employees in the Seattle region over the past year.
Compass is providing “enhanced severance and COBRA health insurance” to laid off employees and hopes to rehire “as many of them as we can as soon as things return to normal,” Reffkin wrote. Among other cost-cutting initiatives such as shifting services entirely to virtual delivery, the CEO reduced his salary to $0 and the executive team reduced its pay by 25%.
“I don’t have a crystal ball, but I believe that in 100 days the real estate market will bounce back and our customers, company and country will be climbing its way out of a recession,” he said in the letter.
Other real estate companies are also making changes in light of the COVID-19 outbreak. Both Zillow and Redfin have suspended their home buying efforts. Redfin CEO Glenn Kelman said last week that the housing market had taken a “turn for the worse.”
Reffkin last week wrote a letter to Congress, asking it to consider real estate agents as part of any COVID-19 response package.
As of earlier this month, Compass had more than 15,000 real estate agents across 100-plus U.S. cities. It has more than 400 brokers in the Seattle region across seven offices. The company recently opened a new 18,000 square-foot office for brokers in Bellevue, Wash.
Compass recently hired Amazon veteran Greg Hart, a former technical advisor to Jeff Bezos, as its new chief product officer.
Here’s the full email from Reffkin to the Compass staff:
I’d like to give everyone an update on the impact of the Coronavirus on our business and some of the decisions we have made in response. I believe leadership is the ability to ground yourself in reality, provide a vision of where you want to go and outline a clear path to getting there — so I’ll share my thoughts in that format.
Grounding Ourselves In The Current Reality
We are in the middle of one of the most challenging and uncertain moments in our lifetimes. The Coronavirus has already shut down entire cities and countries and disrupted the livelihoods of billions of people around the world. We have all only just begun to feel the impacts this will have on our lives and my heart especially goes out to those who are ill themselves or caring for an unwell loved one.
The economic fallout from the spread of this virus has been shockingly swift and far-reaching. In the last recession, the stock market fell 30% over months. This year, it dropped 30% in just 22 days, making it the fastest 30% drop in the history of the stock market, faster than the decline of the Great Depression. Trillions of dollars of wealth, representing people’s life savings and retirement funds, has evaporated. Our own early data is already showing a more-than-60% decrease in showings and with “shelter in place” policies likely coming to the majority of markets, we should expect a much larger decrease. We are modelling a 6-month decline in revenue of 50%. In China, for example, transactions were reduced by 80-90% at the height of the outbreak, however, that was with much more restrictive social distancing measures.
We aren’t just facing an economic recession, we are facing an economic standstill. Many parts of our economy will be completely shut down for months. As a result, our country will likely have gone from a healthy level of employment to more than 10% unemployment in a month, faster than any point in our lifetime. This will almost certainly result in a recession. The best we can hope for is a V-shaped recovery as opposed to an extended recession.
But “hope” isn’t a plan, so today I would like to share with you what our plan is.
Over the past week, we have taken steps to reduce costs wherever we can in our business: scaling back Compass Concierge by 80%, shifting all services to virtual delivery, pausing corporate marketing spend, significantly reducing corporate expenses and office costs and halting all non-essential projects. I reduced my own salary to $0 and the executive team has decided to reduce their salary by 25%.
But amidst this global pandemic, we need to make proactive decisions with the level of caution and foresight that this unpredictable period requires. As we continue to hope for the best, we need to prepare for the worst. So we are joining thousands of other companies across the country in making the heartbreaking decision to let some members of our team go.
Earlier today, we laid off approximately 15% of our employees — passionate, talented professionals who did everything that was asked of them, went above and beyond for our customers and are leaving the company through no fault of their own. We have been lucky to work alongside these folks and will miss them as both colleagues and friends. To support their difficult transition, we’re providing enhanced severance and COBRA health insurance, letting everyone keep their laptops and providing premium tools, training and personal networking to help them land their next opportunity even in this market. And we hope to rehire as many of them as we can as soon as things return to normal.
Our Vision Of Where We Are Going
With all that is changing around us, the one thing that isn’t changing is our vision: creating the single platform for real estate to empower agents to realize their dreams and best serve their buyers and sellers. Helping everyone find their place in the world — no matter how our world changes.
I don’t have a crystal ball, but I believe that in 100 days the real estate market will bounce back and our customers, company and country will be climbing its way out of a recession.
How We Are Going To Get There
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. I remain optimistic about our future. Compass has a strong cash position, $0 of debt and a proven business model. I have complete confidence in our ability to weather this storm and bounce back stronger. We are going to get through this. But not without some difficult days ahead. Today was not an easy day for Compass. But we are well positioned to not just survive but thrive as the economy rebounds.
Every investment we’ve made over the past 7 years has set us up to operate in an environment like this: our tech platform and tools, our solutions-driven approach and our culture of doing whatever it takes to empower our customers. Over the past two weeks, we’ve hosted virtual sales meetings using our video conference system for thousands of agents and national agent calls with leading economists and bankers. We’ve quickly launched new video-based training to help agents to empower them to grow, even if their business has slowed. We have real-time, chat-based support inside our platform; IT support 16 hours a day, 7 days a week; online tools to schedule meetings with our Agent Experience Managers; remote desktop access and online payments and onboarding and more.
While most brokerages won’t build anything new over the coming months for agents and their clients, Compass has the best technology team in real estate and we are going to continue improving our platform every single day.
During this crisis and beyond, we are going to provide our customers more value than we ever have before and more value than any other brokerage ever could.
I say all of this with the full knowledge that what happens with Compass pales in comparison to what’s happening with our planet as a whole. Our world is being tested right now. Our country is being tested right now. WE are each being tested right now. And we’re being reminded of the importance of the only thing that ever truly matters: our health and the health of those we love.
But we will prevail. The world has survived recessions, depressions, natural disasters, world wars, and yes, global pandemics, before. I feel hopeful that China’s apparent success at reducing the spread of the Coronavirus and restarting their enormous economy may provide a blueprint for our future, as well. And I feel hopeful because of the ways I see people throughout our company and throughout our society stepping up during this challenging time. Thank you.
Please continue to do whatever you need to take care of yourselves, your families and loved ones, your communities and each other during this time. If you are in need of support yourself, please reach out to your people & culture partner, your manager, or me directly.