A day after Compass announced its fourth round of layoffs since June 2022, the real estate brokerage appears to be looking at ways to further reduce costs.
The brokerage is currently shopping around to sublease its New York City headquarters near Union Square, as first reported by The Real Deal.
A spokesperson for the firm confirmed that Compass is hoping to find someone to sublease all or a portion of its 89,000 square foot office space at RFR Realty’s 90 Fifth Avenue. The firm’s lease runs through 2025 and it is asking roughly $60 per square foot.
“We said to a couple of our brokers, ‘If you can get a couple compelling deals to sublease these floors, let us know,’” Rory Golod, who oversees the Northeast and California for Compass, told The Real Deal. “We don’t have a specific mandate, it’s more opportunistic.”
According to Compass, which occupies floors 3-11 at 90 Fifth Avenue, the firm subleased space on floors five and eight prior to the COVID-19 pandemic.
The 90 Fifth Avenue office is an employee-only office, meaning that agents will not be impacted by the decision to further sublease the space.
“On the employee side it’s a whole different thing because the employee offices are not needed for branding and market presence,” Golod told the publication. “The plan is still not to consolidate offices unless it’s a mergers-and-acquisitions situation.”
During the third quarter of 2022, Compass lost $154 million — for a total loss of nearly $1 billion since the start of 2021. According to the firm’s annual Securities and Exchange Commission filings, Compass spent $135 million for office leases in 2021. Its future lease liabilities at the end of last year totaled more than $564 million.
“The past 12 months have been tough and the next 18 months appear that they can be tougher,” Robert Reffkin, the firm’s CEO, told inventors and analysts on the brokerage’s third-quarter 2022 earnings call. “Since the second quarter this year, we have been aggressively melting down our expenses to adapt to this rapidly deteriorating market and already have achieved significant cost reductions in our technology, engineering and other operating expenses through a variety of measures, including force reductions.”
Reffkin also noted that the firm would be implementing further cost cutting measures as Compass prepares for what some are predicting to be a significant double-digit decline in transactions in 2023.
In addition, executives said the brokerage plans to be free cash flow positive in the second quarter of 2023.
