Restructuring – the code word in real estate?

As human resource specialists say, the domino effect has taken hold of the real estate market’s human resources. The top companies in the marketplace reported worrying losses as demand dried up.

Regatta real estate advisor reported 5 million euro business for 2008, 37.5% poorer than managers had expected. Meanwhile, other market players were seeing their profits taking dramatic nosedives amid worsening market conditions. CBRE recorded a profit contracted by 80% while Colliers International, the biggest player in the local real estate advisory marked 17% lower business than a year earlier.

Therefore, brokers’ bonuses in real estate, calculated on the executed transactions, fell dramatically. In case of small businesses, the headcount was halved, and in some cases they even dropped out of sight.

“Nearly 200 firms a month were padlocked in November-December. Freelancers and small companies were the first casualties. This is a positive consequence of the financial crisis for large companies, because they didn’t and will not go bankrupt,” said Laurentiu Munteanu, manager of Activ Imob advisor.

Although it is hard to say accurately, Laurentiu Badea, managing partner of Epsilon Imobiliare and former employee of CBRE Eurisko, said that roughly 15-20% of real estate companies went bankrupt. Therefore, the number of brokers shrank by 30-40%. “There were many freelancers. I am aware of the recent layoffs operated by large companies”, Badea stressed.

Bogdan Georgescu, managing partner of Colliers International says the financial crisis has left a deep imprint on the company, in terms of revenues and bonuses gained by employees.

Up to now, four persons have resigned. In December 2008, the head of retail department, Monica Barbu stepped down after 11 years in Colliers.

On March 6 this year, Ziarul Financiar daily announced the resignation of another renowned person in Colliers, Horatiu Florescu. With nearly 11-year experience in the company, Horatiu Florescu, who started as a simple agent and climbed to the top position in the company, was contributing with 6-7 mln euros to the company’s revenues.

At this point, Colliers’s workforce shrank to 75, after the shutdown of the residential department. Of the 26-member team, 13 were reassigned within the company, while the remaining half was being forced to seek for another job. As Bogdan Georgescu noted, Colliers had no plan to reopen the department in the coming period. “We still provide advisory, but only for two residential projects”, said Georgescu.

The possibility of fresh recruitment at Colliers International remains, however, up in the air. “I only have dreams. Not plans. Plans depend upon external factors in the real estate marketplace, and for now, sky is not clear”, Georgescu concluded.

Eduard Mircea Uzunov, chairman of Regatta real estate advisor said many brokers are now knocking on their door for jobs, especially after the closure of some real estate advisors or departments. Although the number of incoming job applications has raised, the chairman of Regatta remains skeptical on new recruitments in the coming period.

The number of brokers at Regatta’s residential department dropped nearly 40% in first months of 2009 from prior year, down to 40 agents. According to Uzunov’s estimations, many companies active in Bucharest market had roughly 40 up to 60% workforce reduction in their residential departments.

Small companies by turnover and workforce have felt the shiver of the crisis engulfing the global real estate market. Once the market deals unlocked, the revenues recorded by the company sank, as well as the payrolls.

Laurentiu Badea was forced to take drastic measures. After a restructuring, Epsilon Imobiliare kept half of the 14 employees he had had before financial crisis’s outburst.

An effective measure, he says, to stimulate the remaining employees is the constant bonus policy. “If you don’t stimulate your employees, then you have no reason to keep them. It is better to keep your key staff for which you should keep or even raise bonuses. Others will find a job somewhere else”, said the managing director of Epsilon.