Compass came from nowhere to become the Bay Area’s biggest residential brokerage
March 8, 2019
Two years ago, residential real estate brokerage Compass Real Estate had no Bay Area presence to speak of.
But following a blistering run of acquisitions that included technology platforms and their biggest competitors in high-end residential real estate, Compass has become the Bay’s largest residential brokerage with 3,000 agents and nearly 100 local offices, the company said this week.
Their latest acquisition of a former rival, Alain Pinel Realtors, added 1,300 agents to their roster of more than 5,300 throughout the state. By sales volume they’re the top player in San Francisco, Los Angeles and nationwide among independent brokerages, according to metrics provided by Compass. The company’s 96 Bay Area offices account for 40 percent of their locations nationwide.
Compass, founded in New York in 2012, is now valued at $4.4 billion. The company has raised $1.2 billion from major funding rounds led by Fidelity and Softbank Vision Fund, using that money to consolidate local real estate companies at a breakneck clip. In July, Compass acquired Paragon Real Estate Group and a month later it bought Pacific Union International, two of the the Bay’s largest residential brokerages.
Last week Compass acquired Contactually Inc., a customer relationship management platform that’s been a popular tool among brokers for years. Those software engineers will be brought on to improve Compass’ proprietary software that’s designed to make interactions between agents and clients easier and inform their decision-making at the same time. Kevin Knight, Compass’s manager of Bay Area operations, described the technology as “a single end-to-end platform to make agents the CEOs of their own businesses.”
“Our world view is that agents are the ones that consumers trust,” Knight said. “Technology can come in and help agents be better at what they’re already good at.”
In this way, Knight added, technological tools can keep agents and their personal touch with clients at the center of the business. He acknowledged the “existential challenge to the brokerage model” posed by tech-driven companies breaking into an industry that’s slow to embrace that kind of change.
It’s a question on the table for the thousands of agents who now find themselves working for Compass in recent months after decades in the boutique local operations Compass has acquired. The change in ownership has led some agents to seek greener pastures at other local firms, several former agents new to Compass told the Business Times.
International luxury firm Engel & Völkers has poached some newly minted Compass agents for its own ambitious growth plans in the North Bay. Billion-dollar luxury agents Tracy McLaughlin and Steve Gothelf of Pacific Union have both left for competitors following the Compass acquisition.
Other employees have found the tools refreshing. Duncan Wheeler joined Compass in 2017 after time at Vanguard Properties and Zephyr Real Estate. He said that Compass’s platform has “made my daily life easier” and that in-house coaching kept him in the know as the tools and capabilities grew over time.
“It was very different than other companies then and it’s only gotten better since,” Wheeler said.
“The fact that it’s an industry that’s late to the game (technologically) makes it even more exciting.”
Compass is confident its agents are here to stay. Their agent retention rate is 98 percent over the last two years, a spokesperson said. The company was also on Glassdoor’s Best Places to Work list for 2019.
A number of Compass’s top officials have backgrounds in technology. Examples include Joseph Sirosh, their chief technology officer, formerly of Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN), and top Bay Area executive Peter Jonas, who spent seven years in Facebook’s Mobile Gaming and Apps division and another year directing Uber for Business.
Knight himself formerly headed Pinterest’s brand strategy and worked for Facebook (NASDAQ: FB) and Microsoft. He drew similarities between the vision of Compass’ CEO and co-founder Robert Reffkin and the leadership at those tech companies.
“What always impressed me about those companies was how singularly focused their CEOs were on their products,” Knight said. “We see agents as the end product of the company. Robert is singularly focused on the agents, and when he’s out here he spends every waking minute with them.”
Categorized in: Industry News