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Budget Cuts… Now What?

The commercial real estate market is experiencing a significant shake-up, marked by a wave of departures from property management to proptech to brokerage. The industry-wide brain drain, resulting from layoffs and voluntary exits, poses a threat to companies, prompting questions about the changing landscape of brokerage quality and sophistication.

Key Takeaways:

  • Voluntary Mass Exits: Unlike previous years, the current turmoil has witnessed voluntary mass exits from firms, such as JLL, Avison Young, and Cushman & Wakefield. The departure trend has extended beyond brokerages, affecting tech firms like Lev, which had to tighten its belt amidst rising interest rates.
  • Impact on Brokerages and Professionals: The real estate industry is witnessing a significant thinning of the herd, affecting both young and experienced brokers. The economic environment, described as a “perfect storm” due to low office attendance and higher interest rates, is pushing professionals to reevaluate their positions, leading to a potential industry-wide impact.
  • Potential Consequences: The ongoing churn could lead to a less diverse and smaller brokerage landscape, with potential consolidation or closures of some firms. Who will survive? Those who are willing to adapt, listen to the data, and experiment with new technologies. 

As the industry navigates this turbulence, the remaining professionals and firms must adapt strategically to thrive in the evolving commercial real estate market.

Charlie Coppola
[email protected] 



Commercial Real Estate Turnover: Why Pros Leave — and What Comes Next

Waiting for Gotham’s commercial real estate market to turn around has felt a lot like waiting for Godot to arrive. And some brokers are tired of just killing time.

From property management to proptech to brokerage, commercial real estate has seen a wave of departures this year — voluntary and otherwise. As employees are laid off or exit on their own, the cuts could cause an industry-wide brain drain and even put some companies out of business. And everyone’s wondering who will be left standing when the smoke clears.

“What are you left with?” asked Adelaide Polsinelli, a vice chair at Compass. “Do [those brokers] have the experience and the technical knowledge of how to get the deal done? Is the quality of the brokerage industry changing and getting better? Or is it getting less sophisticated?”

Turnover in commercial real estate is nothing new, at least since the COVID-19 pandemic. In 2020, cuts were commonplace. Avison Youngtrimmed its tri-state workforceCBRE (CBRE) and JLL (JLL)shrunk their headcounts, and Marcus & Millichap announced in May 2020 it would shed 20 percent of its workforce. 

But, three years later, it’s the same song and dance. 

JLL spent $5.8 million in severance and other employment-related costs in the second quarter of 2023. Cushman & Wakefield (CWK) spent $12.2 million on cost-saving initiatives in that same period, including “a reduction in headcount across select roles” to help “optimize” its workforce, according to its earnings report. Avison Young planned $18.5 million in budget cuts last year, including employee downsizing, and CBRE is moving forward with a $400 million cost-savings plan. (Representatives from CBRE, JLL and C&W declined to comment.)

Except, this time around, some firms have seen voluntary mass exits. B6 Real Estate Advisorssaw a wave of departures in September, after a report by The Real Deal found that CEO and founder Paul Massey owed about $2 million in city, state and federal taxes and has struggled to pay for his investment sales firm’s Midtown offices. (Massey did not respond to a request for comment.)

B6 was hiring for eight open positions in its mortgage and investment sales businesses across New York City and New Jersey as of Oct. 17, according to its website. Its “team” page, where it listed 48 employees in March, was down to just five as of Oct. 17, according to an archived version of the website. 

Brian Whelan, who left B6 to lead Ripco Real Estate’s northern Manhattan investment sales division, said there have been departures across the board. (Whelan also made it clear that he “fully believes” B6 will survive under Massey’s guidance, whom he described as “a legend.”)

“I think in the last 60 to 90 days there’s been a big shake-up across the industry,” Whelan said. “I have seen a lot of brokers changing shops of late. Since it’s a little bit quieter on the transactional side, they’re probably using it as a time to get their own house in order and make sure that the platform they have is best suited to what they need to do for the next cycle.”

Departures — both voluntary and otherwise — are hitting more than just brokerages. Lev, a tech firm with a commercial lending platform, laid off 34 employees earlier this year after cutting 30 staffers in December 2022. Lev founder Yaakov Zar said the firm needed to tighten its belt, like many other companies, as rising interest rates put pressure on real estate. He’s looking to hire selectively this year.

“It’s been quite a rough market once again,” Zar said. “Starting in the middle of 2022, when interest rates started going up, there was a pretty drastic shift in transactions, and everyone was trying to figure out what they needed to do to survive in that market with the reduced transaction volume. Everyone is thinking: Are we in for another long, scary, painful situation?”

We might be. Brookfield Properties laid off fewer than 100 full-time employees this year from its North America commercial development group, CoStar reported. Office construction firm Henegan Construction laid off 55 workers ahead of its closure later this year, according to a New York State Department of Labor filing. Construction giant Lendlease laid off 10 percent of its global workforce — about 740 people — earlier this year, according to Multifamily Dive.

Commercial real estate owners have observed less turnover within their own firms — or so they say — but most everyone in the business seems to have noticed a change. The herd has thinned, and not just for those who work in the office market. 

The number of Real Estate Board of New York (REBNY) members — which includes both commercial and residential brokers — has declined by just over 9 percent from 2019 to 2023, from about 16,500 members to 15,500, according to REBNY. That’s in line with the drop in the number of licensed real estate brokers and salespeople in New York City. 

Retail brokers have felt the burn, too. Some professionals have swapped shops while business is slow in order to grab a signing bonus check, said Cory Zelnik, founder and CEO of retail brokerage Zelnik & Company. Others are considering exiting the field entirely, said David Abrams, founder and CEO of retail brokerage MasonRe.

“I’ve definitely had a lot of conversations in the last few months with people looking to leave the bigger brokerages, and either stay within it and see where they can go, or [who are] saying, ‘My time’s up,’” Abrams said.

But who can blame them for leaving? Josh Augenbaum, president of Augenbaum Realty, has never seen a more difficult market in his 22 years in the business. Both he and Jamil Lacourt, chief operating officer at L&L Holding Company, independently described the economic environment as “a perfect storm” thanks to a nightmarish combination of low office attendance and high interest rates. 

The tough market is impacting two groups of real estate professionals in particular: young brokers and those near retirement age, said David Schechtman, a senior executive managing director for investment sales at Meridian Investment Sales.

“It’s an age thing too, because as you get older, if you’re good, you inevitably develop recurring clients,” Schechtman said. “I would say the youngest — those in their early 20s — some of them will have to put this on pause if they don’t have the financial means to survive.”

Even some below the age of 30 have switched firms or ditched the sector. Of Commercial Observer’s 75 young professional honorees profiled in 2020, 28 have gotten new jobs within commercial real estate while two left the industry entirely, according to the professionals’ LinkedIn profiles. Of the 81 people in the 2022 class, 14 found new roles within the industry while eight abandoned it. 

Schechtman predicts something of a bell curve for commercial brokerage: The very young will exit because it’s too difficult to continue, while those close to retirement age will decide they’ve had enough. That’s something that’s been borne out in Lacourt’s network.

“I’ve seen across the board — not particularly here at L&L, but just industry colleagues, peers and people that I know — some of the older demographic is saying, ‘You know, I’ve been doing this for 30 or 35 years, maybe even more. … COVID-19 happened, the market is a little bit different, and I’m at a stage in my life where maybe I could pursue a new venture.’ ”

Brokers young and old leaving the business could impact the industry in a handful of ways. Residential firms could benefit from an influx of talent, something that Gustavo Rusconi, vice president of the residential owner, manager and brokerage Argo Real Estate, has already observed. 

Rusconi said he has received a handful of applications from commercial property managers looking to switch to the residential side in the past two years. There’s simply not as much work involved in managing underutilized commercial properties (think older office buildings). 

“Buildings are not occupied, so [commercial property managers] don’t need as many people to do the job as they did pre-COVID,” Rusconi said. “Pre-COVID, almost no one came from the commercial to residential side. This is a post-COVID phenomenon.”

Commercial real estate firms could be left with “a crop of agents that may not be as sophisticated or experienced,” said Polsinelli. And high turnover could complicate the deals that do make it to the finish line. But a broker who switches companies knows to put the client’s interests first to score their future business, said Dorothy Alpert, principal and tri-state president at Avison Young.

“The focus is in doing the best thing in the interest of the client, because that client could be a future client of any one of those firms,” Alpert said.

Young brokers will also have to work twice as hard to succeed, or come to the trade with significant advantages.

“I don’t see how people can enter the business in the next three years, unless they’re independently wealthy, or they have second jobs,” Schechtman said.

Higher barriers to entry could make brokerage less diverse and smaller overall. It could also result in the consolidation, or even the closure, of some firms, said Bob Knakal, a senior managing director at JLL. 

“The brokerage ranks thin out when times are bad,” Knakal said. “There is the ‘grass is always greener’ theory. People think, ‘If I went to another firm I’d probably do better, or maybe I can get some firm to give me a couple of bucks to move over there.’ … And then there are firms that go out of business and people scramble to find a new spot. You have all these things going on at once.”

But Knakal expects brokerage to re-expand as soon as the market improves. Some professionals are already preparing for the industry to turn around, said Stephanie Biernbaum, chief people officer at developer Hines.

“I think that top talent right now is getting ready to gear up for what we hope will be an exciting new cycle of value creation,” Biernbaum said. “In some cases, that would mean staying put where they are, if they’re happy where they are and confident in the platform that they’re on. … I think there are lots of cases, though, where there would be people considering whether now is the right catalytic moment for me to make a move.”

Biernbaum said Hines saw more turnover during the so-called “great resignation” in 2021 than this year, where it expects to hire around 1,000 new staffers globally. (Hines had hired 802 new workers as of the third quarter, said Biernbaum.)

And there is one major silver lining to a downturn: Those that stay in the business will likely be better professionals because of the difficult market, said Shimon Shkury, president and founder of investment sales firm Ariel Property Advisors

“After every downturn, what we’ve seen is that the professional brokers who stayed around, that worked with their clients and gave the right advice, actually got out of it a lot stronger,” Shkury said. “I think there’s probably going to be a little less brokers in two years in the industry, but those who will stay will benefit tremendously from the investment they make today in their relationships.”



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