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Forecasting a massive hit from policies to stop the spread of coronavirus, New York real estate startup Compass has laid off 15% of employees.
“As we continue to hope for the best, we need to prepare for the worst,” wrote CEO Robert Reffkin Monday in an email to his staff. “So we are joining thousands of other companies across the country in making the heartbreaking decision to let some members of our team go.”
As the coronavirus pandemic has roiled stock markets and forced businesses around the United States to put operations on hold, companies have started laying off workers. Economists, including those at real estate services firm CBRE, predict the unemployment rate will jump from 3.5% to 5%—meaning 2 million people would lose jobs. Reffkin argued the rate could go as high at 10%.
The roughly 375 Compass cuts—which hit departments including marketing, finance and M&A—came just days after Reffkin penned an open letter urging Congress to consider economic relief for real estate agents, who he described as entrepreneurs whose businesses would be disproportionately hurt by social distancing and shelter-in-place measures. (As is typical in the business of selling homes, the 15,000 agents that work under the Compass banner are independent contractors paid via 1099.)
Reffkin’s note to employees, shows his own business is on the ropes as well. He predicted a 6-month decline in revenue of 50%, noting that at the height of the outbreak in China, real estate transactions fell by 80-90%. Compass has already seen the number of home showings drop by more-than-60%. “With ‘shelter in place’ policies likely coming to the majority of markets, we should expect a much larger decrease,” he wrote.
In addition to laying off workers, Compass is pausing corporate marketing spend and halting non-essential projects, such as a program to provide sellers with bridge loans. Reffkin also reduced his salary to $0, while other members of the executive team are taking 25% pay cuts.
Compass was already under pressure to cut costs, long before the pandemic struck. The Softbank-backed brokerage was valued at $6.4 billion in July 2019, but its valuation and tech-credentials have come under scrutiny since WeWork’s botched public offering last fall. Last week Softbank backed away from a $3 billion deal to buy out WeWork shareholders. Monday, to keep its own share price from collapsing further, the Japanese telecom company announced asset sales and a massive buyback.
“Compass doesn’t need their financial support,” said Reffkin of Softbank in an interview with Forbes lat week. “My focus isn’t on Softbank. It’s on the over 15,000 agents we have, our customers, our 2,500 employees. All my focus at this time on them.”