Crye-Leike Office Closings Shine Light On Poor Market – Memphis Daily News

Crye-Leike Office Closings Shine Light On Poor Market – Memphis Daily News
CLOSING TIME: Crye-Leike Realtors has closed two branches in Memphis ? including this one at 1396 E. Shelby Drive in Whitehaven as well as one at 3634 Austin Peay Highway in Bartlett ? with no plans to replace them. ? PHOTO BY ERIC SMITH

For the first time in its 31-year history, Crye-Leike Realtors has shuttered branches without plans to replace them, proof the housing crisis is gaining strength as real estate companies shrink their footprints to reduce overhead and cope with the downturn.

 

The longtime realty firm recently closed two offices in Memphis, four in Nashville and one in Chattanooga, Tenn., as a direct result of the slumping real estate market, company officials told The Daily News last week.

 

Crye-Leike within the past two months closed branches at 1396 E. Shelby Drive in Whitehaven and at 3634 Austin Peay Highway in Bartlett. Agents at those offices were consolidated into nearby Crye-Leike locations but not all employees survived the closures.

 

Crye-Leike this year has laid off 24 support-staff employees in Memphis, its largest region, and 89 company-wide. Most of the layoffs were in office administration and reception, company officials said.

 

Founded by Harold Crye and Dick Leike in 1977, the company has grown into the largest real estate firm in Tennessee and the fourth largest in the nation. But this year’s declining home sales took a toll on the bottom line, and the owners decided to dissolve underperforming branches.

 

“This is the first time we’ve ever had to close offices,” Leike said. “If you’re not getting the calls, you’re not getting the contracts, then you don’t need the same support staff you need for 25 percent more business. We’ve had to trim those in areas. That’s just another thing that you’re doing to try and right-size your business model to the market conditions.”

Lose some, gain some

 

The market conditions are indeed grim for Crye-Leike and everyone else in the business. Residential sales declined 18.9 percent in the second quarter of 2008 (April through June) compared to the same quarter a year ago, according to Chandler Reports, www.chandlerreports.com.

 

Just 4,492 home sales occurred in Q2, down from 5,536 in Q2 2007, which in turn was down from the same period of 2006. Also, the average sales price and total sales volume dropped significantly.

 

Some Crye-Leike branches especially had been slow this year, Leike said.

 

“When you walk in these offices and you don’t have them full of people making deals and so forth, you have to start cutting back,” Leike said. “I don’t know that we have any other plans, but we’ll see what the marketplace does.”

 

The Whitehaven and Bartlett branch closings aren’t Crye-Leike’s only changes. The company also closed its Millington office, although it then opened a branch in nearby Atoka, in Tipton County, so that registered neither a net loss nor a net gain.

 

And while four branches closed in the Nashville area, one recently opened and another one is coming soon. Also, in the Atlanta metro area, while the company closed three branches, next month it will open two, showing a net loss of one office for that market.

 

Mike Machak, public relations director for Crye-Leike out of the company’s Brentwood, Tenn., office, said laying off employees was a difficult decision for the company, so it was performed with careful consideration.

 

“Crye-Leike doesn’t take a ?cookie cutter’ approach with layoffs,” Machak said. “They are the result of evaluating all the many ways a company can reduce expenses – in this case, when the market is down 30-plus percent. One measure for determining staffing is a ?units per staff’ approach. Staffing is determined based, in part, on the number of units an office generates that will dictate the workload for employees, office administrators and staff.”

Not just Crye-Leike

 

Of course, Crye-Leike isn’t alone in the contraction – or consolidation – of offices. Re/Max Elite has closed two offices in the past year, one in Cordova and one in East Memphis, moving agents in those offices to its Collierville locale, said company owner Harry Baker.

 

“With the reduction in sales volume like it has been, we wanted to tighten things up a little bit so we reduced our overhead,” Baker said.

 

Jules Wade, executive vice president of the Memphis Area Association of Realtors, said the organization hasn’t seen any widespread closing or consolidation of offices in spite of the downturn, but that’s mostly because MAAR doesn’t track that trend. Still, he said, it’s a common occurrence in the business.

 

“That happens day in and day out all the time,” Wade said. “There’s nothing unusual as far as the numbers of those happening.”

 

Wade pointed out that affected real estate agents – who are independent contractors – typically move to other offices, meaning there is still a place for them to practice real estate. But, he added, the membership rolls at MAAR have dipped this year, which might be a better indicator of the slump.

 

“It does mean something that the overall number of members of MAAR is shrinking, and we think that’s a good thing,” he said, citing an over-saturation of agents in a tight market. “I think that, from my perspective, is the most accurate way of tracking what’s going on in the marketplace.”

Industry reality

 

Despite a round of high-profile closures, many said they believe it’s just another reality of the industry – that tightening up is needed when demand declines – and companies again will prosper when the market turns.

 

“The business goes up and down in cycles and that’s what you have when the economy goes down a little bit,” said Baker, a 26-year industry veteran. “You have a change in agents and in business. But it will come back, though. We’re in it for the long haul.”

 

Likewise, it’s not all doom and gloom at Crye-Leike, which is moving forward with plans to convert the old Anderton’s restaurant on Madison Avenue to its new Midtown office. The company also plans to open an office in Oakland to tap into Fayette County’s growth, Leike said.

 

And while the closures and layoffs are disappointing to Leike, he said similar trends are occurring in other industries. It’s simply a necessary reaction to a slowing economy.

 

“We think we’re doing a smart thing; we think we’re keeping the company on a sound financial basis and it’s just like any kind of business,” Leike said. “When your demand is down, you’ve got to adjust costs to deal with it.”