There is a lot of money to be made in real estate. Sometimes the only way to get a bigger share of it is to expand into new territory.
According to the National Association of Realtors, the real estate industry accounts for 15 percent of the U.S. economy. And each year, Realtor commissions total over $45 billion. That makes real estate one of the country’s most significant economic sectors (not to mention lucrative) and with Millennials – the biggest generation in the history of history – maturing into homebuying age, the industry is set to expand over the next several years. If real estate companies want to capitalize on the increased capital, they will have to expand as well – a fact obvious to Chrissy Hunt, who handles strategy and business development for Compass, a real estate brokerage that has offices in New York, Miami, the Hamptons, Boston, Los Angeles, Washington, DC and plans to launch in Chicago by the end of 2015.
“We are in hyper-growth mode and want to be in every major market,” Hunt said.
The decision to expand is an inevitability for any company hoping to grow past a certain size, but as Hunt explained, knowing the difference between the eventuality of expansion and the immediate need for it is imperative for guiding sustainable growth.
“Before expanding into a new market, Compass considers factors such as market fragmentation – at both the brokerage and agent level – concentration of wealth and population throughout the region, types of other brokerages in the market, average number of transactions per year per agent and the general costs of doing business in the region, “ she said.
Using local data, Hunt explained that Compass’ market researchers lay a foundation for projections the company later uses to determine the feasibility of expanding into a particular market. She went on to say that even after determining a move makes fiscal sense, there is still a significant amount of legwork that must precede the opening of a new branch, specifically pointing to each market’s “unique elements,” which includes how the local industry might use technology differently and what kind of support structure is in place.
Hunt said Compass has developed a strategy to proactively identify and understand these elements prior to entering the market.
“After launching our first expansion market, we realized having someone in market as early as possible was one way to adapt quickly, which resulted in the creation of our ‘City Launcher’ role,” she said. “Our first on-the-ground Compass employee focuses on understanding the intricacies of the market prior to launch.”
Hunt stressed the importance of these vanguard agents, and in doing so, revealed the rigorous nature in which the company selects its agents.
“Compass has a selection process that only extends offers to 17 percent of the agents whom we’ve interviewed,” she said. “We look for people who are in the top 1 percentile in their field – people who see the glass as half full. We focus on quality over quantity.”
Hunt added that Compass applies the same vetting process to its leadership, which it uses to bolster agent performance.
“We hire proven leaders who can think strategically on how to solve the biggest challenges our agents are encountering in the marketplace,” she said.
Each strategy Hunt and her team devise represents a single cog in a larger machine meant to not only grow the company’s business and brand, but to make life easier for its agents.
“Our expansion helps us create the systems and insights to save our agents time, allowing them to spend more time with clients,” she said.
Deciding and executing an effective expansion into another metropolitan market, or even a more focused sector of a company’s existing market, is a tough, timely process, Hunt admitted, but if done successfully, a company can construct a network to benefit all in its employ. “By building a national framework, we can take the great ideas of one agent and make it available to the entire, nationwide Compass network.”