Some brokers need a company behind them. Others might just need a supplier.
A number of fascinating approaches are emerging in high-end residential brokerage, a business whose demise is predicted whenever there’s a market downturn, a crackdown on the oligarchs, or a venture capital rush that promises a transformation.
Brokers haven’t gone anywhere yet — in fact, 2021 has been a banner year for most major New York companies — but their strategies for meeting talent needs have begun to diverge sharply. I’m going to butt up some sports metaphors here, so forgive me in advance.
Let’s call the first approach ‘no player is bigger than the club’, popularized by legendary Manchester United manager Sir Alex Ferguson. This treats brokerage like a traditional business – you almost forget that agents are independent contractors – the corporate brand replacing that of any individual rainmaker.
In this approach, illustrated by Douglas Elliman, Brown Harris Stevens or newcomer Compass, the company’s expertise, training and network are highlighted. Leaders give pep talks, speak at panels, publish opinion pieces, do TV hits, and emphasize that it’s the company that does the magic.
The second approach – call it the “personality cult on social media steroids” – was pioneered in New York by Ryan Serhant, who left Nest Seekers to strike out on his own in late 2020, acknowledging that his TV fame- reality and Ken Doll appearances were great tools for creating a new-age, socially-first business.
Serhant’s star power, extreme fussiness and willingness to tear up the buttoned-up image of a luxury real estate broker make him a target for the old guard – he took heat from BHS CEO Bess Freedman during a recent panel that I moderated – but he is clearly finding success in building a business in his image.
The Serhant model is the least repeatable, as not many brokers have this kind of reach (Fredrik Eklund or Elliman’s Josh Altman are the only others that come to mind). But there is a third approach that concentrates, one that seeks the stars but not to eclipse them.
It’s embodied by Side, a company-backed startup that bills itself as a “back office for top brokers,” and as my colleague Katherine Kallergis reported yesterday, just landed two of the hottest traders in the country. , Tal and Oren Alexander.
Call them what you will – attention-obsessed, controversial, bro-y – the Alexanders are clearly the top performers. Elliman’s Alexander team said it negotiated $1.8 billion in sales last year in New York, South Florida, the Hamptons and Aspen, and rode the wave when the market topped South Florida range has gone bananas during the pandemic, breaking records and even putting Manhattan prices to shame.
Side’s win is a big loss for Elliman — the team accounted for 3.5% of the company’s $51 billion in business volume last year — and a direct challenge to New York’s settlement companies. York, whose fellow rainmakers might now be wondering if they still need a traditional brokerage.
Side founder Guy Gal seems to be channeling former Chicago Bulls head coach Doug Collins with his “Give the ball to Michael and everybody’s off” philosophy. His company, he will tell you, is an elite agent service provider, nothing more.
“They can fire us whenever they want,” he said of the Alexanders on Tuesday. “We are a supplier for them.”
Side pushed that approach to a $2.5 billion valuation and built a roster of star brokers in Los Angeles, San Francisco and Miami — all of whom run their own brands and pocket 90% of the loot. Side’s 10% discount is far less than traditional businesses would typically accept in New York.
The startup had its own set of challenges; last week, Inman reported that he had laid off a tenth of its staff. But landing the Alexanders gave Gal another chance to wonder why New York’s rainmakers would give up so much of their commissions for handholds they don’t need. He called the standard commission rates – traditionally, large New York firms retain 25-50% of agent commissions, depending on seniority, sales volume and other factors – “outrageous and operating”.
“How are agents supposed to invest in their growth and their services when they bear all the costs and risks, do all the work and still give a quarter of their income to a company in exchange for a logo? ” he told me on Twitter. “Savage.”
Write to Hiten Samtani at [email protected] Where @hitsamty on Twitter.