When Keller Williams NYC launched in 2011, the goal was to grow as big as possible as fast as possible. But after reaching 900 agents, co-founder Ilan Bracha said the brokerage ended up with too many duds – agents who were eating up space and resources, but not doing deals.
The danger of its hypergrowth-through-recruitment strategy became apparent earlier this year, when Bracha and his co-founder Haim Binstock took a hard look at the company books.
“We saw where the market was heading,” Bracha said during an interview with The Real Deal on Wednesday. “In order to keep profits, we had to do some changes. One of them was to change the team leader.”
In April, Keller Williams laid off Lezley Charles, who was CEO of the Midtown office. It also let several other managers go, and it purged non-active agents from its ranks. To reduce overhead, the firm is sub-subleasing up to half its 29,000-square-foot office at 1155 Avenue of the Americas.
Going forward, the Midtown office — which has 455 agents, down from 750 — will also hire more selectively.
“The goal is to be the largest, but you still want it with quality [not] quantity,” Bracha said. “The restructure is to have quality agents, producing agents, people who want to build their career.”
Until recently, the Manhattan offices of Keller Williams were among the most lucrative franchises in the company in recent years — generating around $1 million in profits each year dating back to 2014, according to the parent company Keller William’s in-house publication.
But the franchise wasn’t immune to a dip in the market or heightened competition for agents.
In 2015, Keller Williams’ Midtown office went on a recruiting spree, targeting graduates of the New York Real Estate Institute. At its peak, the Manhattan offices of Keller Williams counted around 900 agents, Bracha said. One manager said about 150 of them were in the Tribeca office, while the rest were in Midtown.
But according to one manager, only about 200 agents were making enough money to pay their bills and drive profits to the firm.
“We were getting 20 to 30 [new] agents every 15 to 20 days,” said the manager, who described the hiring spree as a failed experiment. “It’s really tough to do that on a massive scale for a long period of time… It was becoming increasingly hard to carry that cost, so we turned the faucet off.”
The shift in strategy — along with the Midtown space hitting the market — fueled rumors that the firm was shutting entirely. The din of those rumors grew louder after the shutdown of Town Residential in April, which the CEO of that firm, Andrew Heiberger, attributed to intense competition for agents and high commission payouts.
“All the competition out there, they’re trying to take a piece of the pie,” Bracha said. “They all want a piece of the commission.”
Though he’s looking to cut costs and reduce the firm’s office footprint for now, Bracha — who launched a Keller Williams franchise in Israel last year — said he plans to have a total of five to six offices in Manhattan within five years.
“The changes we’re doing in Midtown, they’re necessary changes,” he said. “We’re sitting on 30,000 square feet” at a time when the industry is shifting toward smaller offices. “We’re following the trend.”