I was driving down Lindbergh the other day and I noticed a real estate brokerage that had been there forever suddenly wasn’t there anymore. It was kind of a surprise to me, because I’d been in that office before. It was really nice, with a large area in the front to meet with potential clients, and then lots of space for office style tasks. Real Estate Brokerages are closing in South St. Louis, and I believe I have a few reasons why.
- The wide use of affordable technology. Years ago, you would go to the real estate brokerage as an agent to make and answer phone calls in cubicles stacked one next to each other. Anytime someone would call about a listing, a real estate agent would answer, and if they weren’t using another real estate agent, the one on the phone had the first chance of getting a new client. Now, if you go to the back part of a real estate office, some have kept the space as homage to the past. Others have just made more “open space” in the office. The same thing happened with copiers and fax machines. For a starting agent on commission, they had to keep their expenses way down just to have a chance of survival. You couldn’t really afford a copy machine at your home, and people used faxes instead of email.
- Fewer walk in clients. When is the last time you heard of someone looking to buy their dream home or sell their current home walking randomly into a real estate office? I’ve never heard of it. Today, even if you walked into an office, I’m not sure there would be any agents there.
- Group dynamics I know of a couple of offices where the average age in the office has to be pushing 80. That’s not a slight to seasoned citizens, it’s just a situation where if you are in your 20’s and have moved to that office, it’s going to be strange. I had a friend who was a real estate recruiter and he told me that one time he went into that office and asked one of the real estate agents if they would move. “Never!”, they said, “We love the coffee here!”. When the concern is the coffee and not real estate transactions, that’s an issue. If you are a real estate broker in St. Louis actively recruiting new agents, you’re looking for bodies, not how they will work within the current group. I think this is a very big mistake. As evidence, there was a pretty well-known office around Kirkwood that pretty much blew up partly due to the agents just not agreeing or seeing eye to eye.
- High Rents If you have 20 offices in St. Louis, and you can cut the number in half and still get the same number of transactions, would you do it? It’s a no brainer. In our real estate business, commercial rents have gone up, but compensation to the broker is squeezed. For example, the top commissioned real estate salespeople in the office are usually in at 100% commission. They pay a fee per month, and they are left alone. That second and third tier of agents is where the money is for the real estate brokerage.
- Office location doesn’t equal transactions With our modern communication, it’s rare that agents actually list or represent buyers at the location of the office they are licensed with. As an example, our office is in Affton. We advertise in Affton. 95% of our transactions are outside of Affton. I used to think that it was a convenience factor. For example, clients who live in University City would prefer to work with a real estate brokerage in University City because it was convenient. With electronic signatures and email, there’s a VERY good chance that the home buyer or home seller will NEVER physically go to the real estate office during a transaction. They may go to a title company, but the title company kind of dictates where the closing is.
The art and practice of selling real estate evolves over time. When it was common 25 years ago for a real estate franchise to have 25 offices around town, that time is over. The modern real estate office is usually never filled with agents, and is used more for real estate brokerage support staff and recruiting new agents. At Deerwood Realty, we’ve proven that there’s very few good reasons to have a physical office. Well, we kind of have an office…have you seen us at a coffee shop nearby? I think I know all of them!