• WeWork said Monday that it would assume leases at locations in Seattle at Holyoke Building, Hawk Tower, and 1201 3rd Ave, and in Bellevue, Wash., at Bellevue Place and Lincoln Square. A “lease assumption,” as it’s known in commercial real estate, involves negotiating with a landlord and filing a court motion.
• WeWork previously announced plans to hold onto locations in Seattle at 1448 NW Market St.; 1600 7th Ave.; 1099 Stewart St.; and 3120 139th Ave. SE and 10885 NE 4th St. in Bellevue.
• The company, which filed for Chapter 11 bankruptcy last fall, said it has determined a path forward at over 97% of its global, wholly-owned lease portfolio, reducing total rent commitments by over $11 billion.

[This story originally appeared on Real Estate News.]

SCOTTSDALE, Ariz. — When looking toward Zillow’s future, CEO and co-founder Rich Barton emphasized the company’s tech-influenced past — and tech-heavy present — while speaking at the T3 Leadership Summit.

“Our roots, our genes are back at Microsoft,” he told the audience, referring to his early experience working at the software giant during the ’90s. “So we know and love the super geeky people, and we know how to create an environment where they thrive.”

A digital, integrated Zillow — with an agent focus

Barton discussed Zillow’s efforts to expand its digital offerings and diversify its revenue streams through acquisitions of products popular among agents. But expanding Zillow’s focus beyond buyer leads is not coincidental — the industry continues to move in a direction where technology plays an increasingly important role, he explained. 

In that future, Zillow needs agents as much as it needs consumers.

Barton said the company has made strategic decisions “in order to really affect the kind of digital change we knew in our hearts and in our brains that needed to happen in the real estate industry,” he said, explaining that purchases of companies like ShowingTime and Follow Up Boss allowed Zillow “to move down the funnel towards the transaction.”

Notably, Barton did not mention the oft-messaged “housing super app” concept — though he did allude to it while speaking about Zillow’s efforts to automate and digitize the home purchase transaction. 

“We’re not just investing in the digital, integrated Zillow — which is kind of our little walled garden — we see a massive opportunity to digitize and offer an integrated set of services and tools platform for the industry as a whole.” 

He also noted that more than half of Zillow’s $2 billion in revenue comes from streams other than its Premier Agent business. And expect to see further integration into agents’ day-to-day business, he said, via new features planned for Follow Up Boss.

“Think about how much better Follow Up Boss is going to get when it’s making smarter and smarter suggestions. It will basically become a co-pilot for agents,” Barton said, explaining that the system will perform duties like finding listings for agents and nudging agents with reminders and other actionable items.

‘Resist the urge to chaos’

Barton also discussed the sweeping changes coming to the industry and some of the confusion surrounding the NAR settlement. “We should resist the urge to chaos,” he said to the crowd, suggesting that it’s better to “keep our head down and keep our hands up” in moments of change or uncertainty.

He highlighted Zillow’s efforts to engage and inform consumers of the changing real estate world and pointed audience members to Zillow’s “Real Estate Rights for Consumers” — an effort which also doubles as a public commitment to buyer representation and transparency in the industry. 

Barton offered some guiding principles via an acronym, ARC, which he said stood for access, representation and compensation. He added that “free, fair, transparent access to listings” is not only a cornerstone of Zillow’s ethos, but something that makes the U.S. residential real estate model unique. 

“It is an unbelievable asset of this industry that long ago we all decided to cooperate to share listings with each other,” he said, garnering an applause. “Most countries do not have anywhere near the kind of transparency for consumers and professionals alike that we have in the U.S.”

‘Kill the squirrel’

But Barton also alluded to his time as the young CEO of Expedia during the 9/11 attacks. “There was speculation that no one would ever travel again,” he said to the audience. “You know, it was a pretty scary time.” Eventually, travel came back, he explained. 

Another scary time? The pandemic. But “what happened to the industry during the first six months?” Barton asked. “Home run. Probably the biggest home run in our careers.” 

Barton also shared a story from when he was growing up in Connecticut and learning how to drive. 

“I swerved to avoid a squirrel and almost had an accident,” he explained. “And my dad took a deep breath, paused, and said, ‘Son, kill the squirrel.’ I would say it’s good advice. In a chaotic time, what are you going to do? Keep your head down and deliver for your customers. Keep on driving.”

WeWork is looking to hold onto another location in Seattle, negotiating new terms with its landlord and filing a court motion Monday to remain in the 15th and Market building in the Ballard neighborhood.

The “lease assumption,” as it’s known in commercial real estate, comes in the final stages of a strategic restructuring after the one-time co-working giant filed for Chapter 11 bankruptcy last fall. The company, once valued at $47 billion, says it has been making progress in a variety of negotiations related to its real estate portfolio.

WeWork says it has saved over $8 billion in total future rent commitments (a more than 40% reduction) and has reached a path forward at 90% of its buildings globally. The company has assumed 40 leases across its portfolio so far, and more are expected to be announced in the coming weeks.

A WeWork location at 1600 Seventh Ave. in Seattle was among eight lease assumptions announced in March.

The Ballard WeWork at 1448 NW Market St. opened in 2019 as a 76,500-square-foot space spread over two floors. It shut down during the COVID-19 pandemic in June 2021, and then reopened in March 2022.

WeWork still operates seven co-working locations in the Seattle area. Portland-based co-working company Centrl Office is taking over the former WeWork space in Kelly-Springfield Building on Capitol Hill this summer.

Peter Greenspan, global head of real estate at WeWork, called the Ballard location one of his company’s most popular locations in the Seattle area.

“It has recently seen an increase in demand from hybrid workers who are looking for workplaces closer to their homes,” Greenspan said. “We are grateful for Martin Selig Real Estate’s collaboration on this new agreement, and we are excited to continue providing our Seattle members with best-in-class workspaces and solutions at this location.”

Lease assumptions are subject to court approval.

PATH, the global health nonprofit, is moving to a new headquarters space in Seattle’s Fremont neighborhood after 15 years in South Lake Union.

PATH announced a lease agreement Thursday with real estate development group Hess Callahan Grey Group to take over the entire 52,000-square-foot space in the West Dock building at 437 N. 34th St. in 2025.

Located on the Burke-Gilman Trail with views of the Lake Washington Ship Canal, and next to offices for Google and Adobe, West Dock was once home to Sound Mind & Body Gym. But the building was purchased and renovated in 2014 and turned into office space for Tableau, as the maker of data visualization software was growing quickly in Fremont at the time.

The new PATH facility will be home to more than 200 Seattle-area employees and serve as a flagship for more than 3,000 global PATH employees. The nonprofit has more than 47 offices across 24 countries.

PATH’s HQ was previously located at 2201 Westlake Ave. The new location will continue to house the organization’s laboratory and product engineering lab, in addition to open-concept collaboration spaces for meetings and events.

“PATH staff envisioned a space that ignites creativity and fosters innovation — and feels distinctly ‘Seattle,'” PATH President and CEO Nikolaj Gilbert said in a news release. “Our global officers are more than workplaces — they’re extensions of local communities and sanctuaries for team members and partners alike. We already feel at home in Fremont and can’t wait to introduce our staff and friends around the world to the neighborhood.”

Tableau, now owned by Salesforce, has given up office space in the area in recent years but still maintains a sizable presence.

• Revenue was down 2% year-over-year to $218.1 million, while net loss of $22.9 million was down from $61.9 million in the year-ago period. Redfin missed slightly on revenue expectations and beat earnings estimates.
• For the full year, Redfin’s revenue was down in 2023 by 11% to $976.7 million, while net losses shrunk to $130 million from $321.1 million.
• The housing market appeared to bounce back late last year but high mortgage rates continue to keep buyers on the sidelines.
• “In a dreadful housing market, Redfin got more efficient in the fourth quarter, again improving gross margins and operating margins, even as we laid the foundation for meaningful long-term growth,” Redfin CEO Glenn Kelman said in a statement.

Related: Redfin targeted in new commissions suit blasting buyer agents via RealEstateNews.com.

Zillow is embracing the new Apple Vision Pro as the ultimate way to experience interactive home tours, launching its Zillow Immerse experience in the App Store.

The Seattle-based real estate technology company called Apple’s spatial computing headset “the next best thing to being there in person” for home shoppers who want to check out virtual walkthroughs and 3D floor plans.

Zillow Immerse was designed specifically for the Vision Pro, utilizing Zillow’s AI-powered Listing Showcase listings, which feature scrolling “hero” images, room-by-room photo organization, interactive floor plans and 3D tours. Using an AI-generated floor plan as a guide, users wearing the headset can take a virtual walk down hallways, poke into rooms and survey a home’s layout.

According to Zillow research, 74% of prospective buyers believe 3D tours help them get a better feel for a home’s space than static photos, and 70% wish that more listings had 3D tours available.

Pre-orders for the Apple Vision Pro start Friday, with a starting price of $3,500.

Related:

• Zillow taps into AI to power new immersive features in virtual home tours
• Microsoft productivity apps and Copilot AI coming to Apple Vision Pro at launch

Co-working giant WeWork is closing a signature Seattle location amid its efforts to restructure and survive its recent bankruptcy filing.

The global office space company will close its space in Capitol Hill’s Kelly-Springfield development on 11th Avenue at the end of February.

“As part of WeWork’s strategic restructuring efforts, we have made the difficult decision to end our operations at Kelly-Springfield,” a WeWork spokesperson said. “We have offered affected members the option to relocate, with our support, to our other Seattle locations and deeply apologize for any inconvenience this may cause.”

Capitol Hill Seattle Blog first reported the news last week.

WeWork has been talking to its roughly 500 landlords globally and has amended 38 leases to achieve roughly $1.5 billion in long-term savings through rent reduction, downsized leased space, shortened lease duration, or sometimes early termination of leases, the company told The Wall Street Journal.

WeWork operates seven other locations in the Seattle area, and the company had no other updates at this time about those spaces. The spokesperson said the city “continues to be a priority market for WeWork.”

The historic, five-story Kelly-Springfield location near the Pike/Pine corridor at 1525 11th Ave., was once home to REI and later a Value Village thrift store. It opened as WeWork in January 2020, just before the COVID-19 pandemic upended office work. CHS Blog reported that there were once plans to have space in the building for around 1,300 workers, including the fourth floor dedicated to space for Microsoft.

“Surrounded by bars, restaurants, and countless entertainment options, this vibrant workspace offers an oasis of productivity for teams of all sizes,” the WeWork website says of the space, which featured “light-filled lounges, modern conference rooms, and sleek private offices.”

Five Iron Golf, a high-tech indoor golf experience backed by Seattle hip-hop star Macklemore, opened on the ground floor of the Kelly-Springfield building in March 2022. Entrepreneur Robbie Cape’s sustainable chicken sandwich restaurant Mt. Joy opened just across the street in December.

GeekWire reported in December on other co-working spaces in Seattle and how they are faring post-pandemic and in the wake of WeWork’s downfall. The Cloud Room, just a couple blocks away from WeWork on 11th Avenue, is “doing better than it ever did,” owner Liz Dunn said at the time.

Co-working makes up a very small portion of the commercial real estate market, accounting for just 3.4% in the U.S. and 1.2% in Seattle. While overall office demand in Seattle is down 67% versus pre-COVID levels (2018-19), demand for flex space is actually up 3.2% year over year, according to commercial real estate technology platform VTS.

But the bigger draw for many who visited an open house Saturday afternoon was the history of the place. This was the home that Jeff Bezos rented in the mid-1990s to launch the company that became Amazon.com.

“I just wanted to see where it all started,” said Manan Patel, an Amazon employee who was one of numerous people with connections to the company who were among the steady stream of visitors at the open house.

The listing team made sure that the home’s history was clear to anyone who visited. Tyler Li, who works for the listing agents Lin Shen and Mina Zhang of Sea to Sky Realty, went to great lengths to create a life-sized replica of the blue “Amazon.com” sign that can be seen behind Bezos in historical photos of the Amazon founder.

The idea that such an influential company came from such humble beginnings is “a very inspiring story,” Li said. By promoting the house’s history, he said, the listing team wanted not only to increase foot traffic to help in the sale of the house, but also to share the story with everyone.

For the open house this weekend, the replica of the sign was placed on a workbench in the garage along with a small collection of framed photos and newspaper articles.

The listing for the home reads, “Welcome to the birthplace of Amazon. Jeff Bezos founded Amazon in the humble garage of this West Bellevue house in 1994.”

It notes that the home was “rebuilt in 2001 to offer modern comfort and style.”

That renovation more than two decades ago makes it tough to pinpoint exactly where Bezos was sitting at the time, but that didn’t seem to matter to those who visited. Many stopped next to the display in the garage to have their photos taken, some of them leaving without going inside to see the rest of the home.

At an asking price of nearly $2.3 million, the home is also a symbol of the price appreciation and shrinking affordability that has accompanied the Seattle-area tech boom over the past decade, driven by the growth of Amazon and other companies. The house last sold for $1.53 million in 2019, up from $620,000 a decade prior.

Two more pieces of historical trivia:

• The home previously featured an oversized mailbox, believed to have been used by Bezos and early employees to accommodate book catalogs they received to help stock their fledgling online bookstore. The mailbox has been replaced, and appears to have been lost to history.
• When Bezos initially rented the home, the company was known as Cadabra, a reference to “abracadabra.” The company changed its name to Amazon after people on the phone misheard it as “cadaver.” 

With a well-kept backyard and vaulted interior ceilings on a quiet suburban street, it should serve as a very nice home for whomever ends up buying it this time. But of course, Bezos has significantly upgraded his digs over the past three decades. The billionaire announced last year that he was officially moving to Miami, and reportedly bought a $79 million mansion in Florida last fall.

Zillow Group and ShowingTime have announced a new lawsuit against the Arizona Regional Multiple Listing Service (ARMLS) and Wisconsin’s Metro Multiple Listing Service (Metro MLS) over what the tech giant claims is an unfair and anticompetitive practice that freezes out ShowingTime in favor of a proprietary, MLS-developed tour appointment tool.

Who is involved? The suit, filed on Dec. 22, names ARMLS, Metro MLS and MLS Aligned as defendants. The Arizona and Wisconsin MLSs, along with five other MLSs, are part of the MLS Aligned network that serves tens of thousands of agents across the country.

The other member MLSs in the MLS Aligned network — RMLS in Oregon, Northern Nevada Regional MLS, UtahRealEstate.com, MLSListings in Northern California and BeachesMLS in Florida — were not listed as defendants in Zillow’s complaint.

In both Zillow Group’s formal legal complaint and a blog post from Chief Industry Development Officer Errol Samuelson, the company singles out ARMLS and Metro MLS for their plans to remove ShowingTime integration and only provide agents the use of a competing product developed by MLS Aligned. 

What does the suit allege? One of the functions of MLS Aligned is to develop products for agents in partner MLSs. The suit targets one of the network’s specific products, Aligned Showings, which was initially offered alongside ShowingTime. 

Zillow Group alleges that “rather than competing on the merits,” MLS Aligned and its members conspired to remove the ShowingTime integration and “create a monopoly in their regions for their own showing management platform.” The complaint, which describes how Zillow offered ShowingTime access for free, refers to the removal as “anticompetitive and exclusionary.”

Zillow’s complaint also noted that ARMLS removed the ShowingTime integration in its member portal on Dec. 27 while Metro MLS would do so in February.  

What did Zillow say? In his blog post, Samuelson provides additional context to the action and said the company had tried to work with the two MLSs on a solution before filing suit. 

Zillow Group “made numerous attempts to convince these two MLSs to keep the seamless ShowingTime integration active as an additional option for their agent members, as other MLSs in the consortium have done,” said Samuelson, but ARMLS and Metro MLS “declined all offered alternatives and resolutions, leaving their agent members with no choice.”

Samuelson describes MLSs as “rulemaking bodies and local monopolies” which have a particularly important duty to avoid conflicts of interest. He said that Zillow is taking this action to protect individual agents’ choice to decide which products and digital tools they use for their business.

A new company will make its nest in Seattle’s “Hawk Tower” in the new year.

Seattle-based business and technology firm Slalom Consulting is moving its headquarters into the glass skyscraper at 255 King St. in January. The building will be renamed “Slalom Hawk Tower.”

The name replaces “Avalara Hawk Tower,” after the Seattle sales tax automation company, which opened a new headquarters in the building in the Pioneer Square neighborhood in February 2018.

With views across the parking lot to Lumen Field, where the Seattle Seahawks, Sounders and OL Reign play, Avalara initially occupied the top six floors of the building and more than 114,000 square feet. The company, which was taken private in a deal last year, said it will continue to occupy four floors.

Slalom did not say how much square footage it would be leasing, but said its footprint would span “multiple floors,” with the ability to expand in the future based on evolving needs.

The company is moving from the Exchange Building at 821 2nd Ave, where it said the expiration of its current lease provided an opportunity to reassess the requirements of its hybrid-work culture and “to consider what is the best fit to support connection, collaboration, and accessibility for our teams.”

Slalom provides tech-related services in various industries to clients across the globe including Alaska Airlines, Allstate, eBay, Hyatt, Microsoft, REI, and others. Citing “significant shifts” within its industry in September, the company cut 7% of its workforce, or about 900 employees.

Slalom recently made Fortune’s “100 Best Companies to Work For” list for the eighth consecutive year.

“Slalom is proud of our Seattle heritage and commitment to the Pacific Northwest community,” Slalom President Tony Rojas said in a statement. “We’re excited to continue managing our global and Seattle market business from the downtown core.”

[This story originally appeared on Real Estate News.]

Redfin is on the “right side of history” in the wake of the verdict against the National Association of Realtors and others in the Sitzer/Burnett commissions lawsuit, CEO Glenn Kelman told investors during the company’s earnings call Thursday.

Kelman said Redfin is uniquely positioned among brokerages to thrive in the face of “massive disruption,” in part because of its decision to break from NAR last month, but also because of its customer focus. 

“Redfin has long counseled our agents to support any fee a listing customer wants to pay a buyer’s agent,” Kelman said. And though the company was named as a defendant in a new commission lawsuit filed this week, “we have very good defenses,” he said.

Kelman told investors that the verdict in the Sitzer/Burnett case may dramatically reduce the number of buyer’s agents and potentially “lead to a revolution in our industry, not just reform,” he said.

“Today, if someone is trying to buy a Redfin listing, we route them to a buyer’s agent but we may instead say we will route them to the listing agent,” he predicted.

“Hiring a buyer’s agent is a choice,” said Kelman, who also touted the company’s self-service technology for buyers and ability to market properties directly to consumers, “taking market share from other brokerages.”

Redfin’s earnings improved, which Kelman credited to cost-cutting efforts. “Our third-quarter results from continuing operations show how much more efficient we’ve become over the last year: revenue declined year over year by 12%, but gross profits increased by 8%, and adjusted EBITDA improved by $20 million,” he said.

Key numbers

Revenue: $269 million, down 12% compared to the third quarter of 2022 and down $7 million from Q2 of this year.

Cash and cash equivalents: $125.8 million, down from $232.2 million at the end of 2022, but up slightly from $118.8 million at the end of Q2.

Gross profit: $98.3 million, up 8% year-over-year, and down just slightly from the previous quarter.

Net loss: $19 million, an improvement over the previous quarter’s net loss of $27.4 million, and significantly better than the net loss of $90.2 million in the third quarter of 2022.

EBITDA: $7.65 million, a $59 million improvement over the third quarter of 2022, and up from a loss of nearly $7 million in Q2.

Transactions: 17,426, down from 21,752 in the third quarter of 2022.

Traffic: 51.3 million monthly average visitors in Q3, down slightly from the previous quarter but up year-over-year.

What Redfin had to say

Kelman colorfully acknowledged the grim reality of today’s housing market.

“But now, like Satan in Paradise Lost, surveying the dismal expanse of rocks, caves, lakes, fens, bogs, and dens of his new home in hell, I feel a twinge of optimism,” he said. “If homes were only a speculative asset, our sales prospects would indeed be grim, but most people buy a home to move to a better life. Those plans can be deferred from 2022 to 2023, but not forever.”

Kelman said Redfin is seeing a meaningful rise in customers seeking listing consultations, and he also sees signs of softening prices. “Owners always mark listings down that didn’t sell in the summer, but there are more price drops this fall since at least 2015,” he said.

Notable moves

Redfin hopes to gain market share in the lucrative San Francisco and Los Angeles markets by piloting a new compensation model, Redfin Max. Agents in the program will remain W-2 employees with benefits, but their compensation will be completely commission-based.

Kelman said if Redfin Max works out in the two pilot markets, it could roll out to other high-price markets in weeks. Some version of the program could go out nationwide in a year if it’s profitable for Redfin and agents alike. 

Longtime Redfin executive Adam Wiener left the company in September. Wiener joined the company in 2007 as a product manager for agent tools, working his way up to president of real estate services. On Sept. 10, Jason Aleem, senior vice president of real estate sales, assumed sole responsibility for Redfin’s brokerage.

• The slow housing market continues to impact the company’s brokerage business, which was down 18% to $166 million in revenue. Average monthly visitors was up just 1% to 51.3 million, and Redfin’s market share dropped slightly year-over-year.
• Redfin’s rentals business continues to be a bright spot, with $47 million in revenue, up 23% year-over-year.
• Redfin stock was up slightly in after-hours trading. Shares are down by nearly 25% over the past month.
• “In October, we raised capital, began generating revenues from a new digital business, and launched all-variable agent pay in California,” said Redfin CEO Glenn Kelman. “This downturn has only made us stronger.”

The demand for office space in Seattle is the lowest among all cities measured in a new report from VTS, a commercial real estate technology platform.

The VTS Office Demand Index (VODI) report released this week shows Seattle experienced the greatest quarterly decline in demand for office space, with a 43% drop quarter-over-quarter and 52% drop year-over-year.

According to VTS, VODI tracks unique new tenant tour requirements of office properties in core U.S. markets. It’s intended to serve as an early indicator of upcoming office leasing activity and track new tenant demand.

The report measured demand in Seattle, Los Angeles, San Francisco, Boston, Washington, D.C., New York City and Chicago. National demand for office space at the end of the third quarter was just half of the pre-pandemic levels. 

The reports says that Seattle’s decline was led by a historically abnormal three-month absence of demand from tenants seeking the largest office spaces of 50,000 or more square feet. Tenants seeking mid-sized office spaces of 10,000-50,000 square feet were up during the period, “preventing an all-out crash in demand,” the report said.

“Seattle’s very low demand for office space is more reminiscent of the beginning of the pandemic than any other time, and it doesn’t appear to be changing soon,” Ryan Masiello, chief strategy officer of VTS, said in a news release. “The last and only other time we saw an absence of tenants seeking large spaces was during the beginning of the pandemic lockdown.”

Masiello added that the Seattle area’s dense population of tech jobs, which are amenable to working from home, has made it difficult to rebound. Another report, from JLL, said the commercial real estate market in the Seattle region continues to see record high vacancies.

“It will likely take some of the big area employers pushing harder for return-to-office, such as Microsoft and Amazon, to reverse this trend,” Masiello said.

Elsewhere in the country, the report points to signs of stability around office demand, despite persistent headwinds such as a cooling job market and ongoing remote work.

Los Angeles experienced the greatest growth despite months-long writer and actor strikes in Hollywood. The city’s demand for spaces greater than 50,000 square feet is now higher than at any time since June 2021.

[This story originally appeared on Real Estate News.]

Zillow shared some good news with investors Wednesday, reporting $496 million in revenue for the third quarter, representing a 3% increase from the same period last year. 

There was a notable 34% uptick in rental revenue and an 88% gain in purchase mortgage originations, Zillow co-founder and CEO Rich Barton highlighted in the letter to shareholders. However, Barton’s prepared remarks during Wednesday’s earnings call with investors were largely dominated by the recent verdict in the landmark Sitzer/Burnett case.

“It’s important that I address the high level of media attention and speculation surrounding several ongoing industry lawsuits, and what the implications may be for the broader residential real estate industry and for Zillow in particular,” Barton said. “The short version is we strongly believe Zillow is well positioned to thrive regardless of how it all plays out.”

Barton added that he believes appeals will likely keep the case “tied up in court for years” and reminded investors that “Zillow is not a party to this lawsuit nor other similar ones.”

Key numbers

Revenue: $496 million in Q3, which was down from $506 million the previous quarter but up 3% compared to the same period last year. 

Cash and cash equivalents: $3.3 billion at the end of Q3, which remained unchanged from the previous quarter. 

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization): $107 million, which was down slightly from $111 million the previous quarter and off from $130 million a year ago.

Net income/loss: Zillow reported a net loss of $28 million for Q3, which was slightly lower than the $35 million net loss from Q2 and significantly better than the $53 million net loss from Q2 2022. 

Traffic and visits: According to Zillow, the company saw 224 million average monthly unique visitors across its various apps and websites in Q3 while total visits during the quarter were 2.6 billion. Both metrics were down 5% year-over-year.

What Zillow had to say

Not only was Barton’s monologue largely focused on the outcome of the commissions trial, but many of the investors on the call had questions about Zillow’s position in a world where there is no guaranteed compensation for buyer agents. 

Barton reaffirmed his support for buyer agents and the theme of buyers having their own representation.

“We believe a well-lit game is cleaner and more equitable. People deserve and need independent representation,” Barton said. “We’ve seen double-siding in the industry, which is clearly a conflict and is at certain times more expensive to the transaction.”

In the letter to shareholders, Barton elaborated further on the theme if buyer agency were to be diminished.

“In this scenario, the U.S. market would likely transition to what we observe in several international geographies, where a few large portals offer a ‘pay to play’ digital listings marketplace,” Barton wrote. “In this scenario, we believe Zillow would be an odds-on favorite to become the leading digital listings marketplace, given our brand, traffic, engagement, and unique focus on solving movers’ real pain points with our software-anchored housing super app vision.”

Notable moves

While there was much discussion about the Sitzer/Burnett trial, Zillow recently won an unrelated case brought by the low-commission brokerage REX related to how the portal displays non-MLS listings. Following the Sitzer/Burnett verdict, however, REX announced it was requesting a new trial, but no ruling on the request has been made.

Additionally, Zillow execs highlighted the company’s recent announcement that it was acquiring popular CRM product Follow Up Boss and how it plays into Zillow’s “housing super app” concept. 

“Today, we are focused on delivering the ‘housing super app,’ a tech-enabled end-to-end platform with products and services that make it easier for people to move,” Barton said. “You’ve heard me say many times that 2023 is crucial for Zillow. It’s a year of execution as we prepare to scale in 2024 and 2025.”

[This story originally appeared on Real Estate News.]

Zillow Group is adding to its arsenal of agent tools with the acquisition of Follow Up Boss, a popular customer relationship management system for agents and brokers. Zillow is paying $400 million in cash up front, plus an additional $100 million cash earnout. 

Follow Up Boss’s 100 employees — including Co-founders Dan Corkill and Tom Markov — will be formally joining Zillow at the completion of the acquisition. The company will continue to operate as an independent brand, similar to ShowingTime, which Zillow acquired in 2021. 

The acquisition is the latest example of Zillow’s investment in its “housing super app” concept, Zillow Group Chief Industry Development Officer Errol Samuelson told Real Estate News.

“Follow Up Boss is another component which can help streamline the communications between the agent or the team and their clients,” Samuelson said. “We already have some integrations between Zillow and Follow Up Boss, so not only are those integrations going to stay in place, but they have 100 other integration partners, and those are going to stay in place.”

But should agents be worried about another beloved agent tool being scooped up by the real estate giant? Samuelson said it’s natural for “very committed customers” to wonder what might happen to products they use — and consider core to their business — when they are bought out.

“What I would say to people who have questions is that everything you loved about Follow Up Boss is only going to get better,” Samuelson said. “And the policy remains the same if you are the person who enters the data into the system — it’s your data and it belongs to you, and that’s not going to change.”

While Follow Up Boss has grown organically in the 13 years since it launched, Zillow will be able to provide a much greater level of investment and infusion of tech into the team and product, Samuelson added.

The news of the acquisition comes on the heels of the verdict against NAR and other major real estate players in the landmark Sitzer/Burnett class action lawsuit on Oct. 31. Zillow’s stock price fell over 7% immediately following the announcement of the verdict and continued to remain around $35.50 per share in after-hours trading. Last month, Zillow was victorious in a separate lawsuit over how it handles non-MLS listings.

This story originally appeared on Real Estate News.

Redfin is cutting ties with the industry’s top trade organization.

Early Monday morning, Redfin published an announcement signed by CEO Glenn Kelman and other top executives indicating that the Seattle-based brokerage would be leaving the National Association of Realtors. 

In the note, Kelman cited two primary reasons for the decision: an NAR policy that mandates a fee for the buyer’s agent on every listing and allegations of sexual harassment at the highest levels of the organization. 

Despite the ongoing commission lawsuits and growing outcry against NAR, Redfin leadership said this wasn’t an impulse decision. 

“We’ve had many meetings with NAR execs to explore compromises on the policies that would let us continue our support,” Redfin leaders wrote, adding that the company has paid over $13 million in NAR dues since 2017. 

Mantill Williams, VP of public relations and communications at NAR, told Real Estate News through a prepared comment that the organization respects Redfin’s decision but stands by its policies. “Redfin told us in June they were planning to separate from NAR, and we respect their choice to do so,” Williams said.

“The U.S. model of local MLS broker marketplaces has long been — and still is — considered the best value in the world. NAR stands by its pro-consumer, pro-competitive guidance for affiliated local broker marketplaces that ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Williams added.

Redfin, which reported having over 2,400 full-time lead agents at the end of 2022, will go further than simply discourage NAR membership — Redfin will require many of its agents to “leave NAR everywhere we can,” the note read. Kelman and team also added that the company had left the NAR board back in June, well before the explosive New York Times investigation into the organization’s ongoing allegations of misconduct.

Kelman, known for his candor and straightforward language, goes even further, saying that “NAR isn’t the future.”

“Our disagreement is with NAR, not with our industry,” the note says. “We love our industry. We’ve tried to love NAR. But enough is enough.”

A jury determined that Zillow did not make deceptive changes to the way it displays non-MLS listings, a significant victory for the company.

The Real Estate Exchange (REX) sued Zillow and the National Association of Realtors over what it says were deceptive practices to conceal non-MLS listings on Zillow’s heavily trafficked website. REX was a low-commission brokerage that ceased operations in May 2022.

In a trial in U.S. District Court in Seattle, a jury decided Sept. 29 that REX did not prove Zillow used false advertising in its decision to put non-MLS listings on a different section of the website. The jury also said Zillow proved its defense on a second claim about unfair or deceptive acts.

“We’re pleased with today’s victory and are ready to move on and focus on what matters: helping customers who come to Zillow get into their next home,” said Will Lemke, corporate communications manager for the company, in an email.

NAR was dropped from the case after U.S. District Judge Thomas Zilly ruled in August that REX Homes’ antitrust claim was without merit, effectively removing NAR as a party to the case. The case continued as Judge Zilly allowed REX’s claims that included unfair/deceptive trade practices.

The case was filed in March 2021, and in the original complaint, REX claims its business was damaged when non-MLS listings on Zillow were relegated to a secondary search results tab, limiting traffic to those listings.

Zillow had modified its site in January 2021 after it began using the Internet Data Exchange (IDX) feed that handles MLS listings. Zillow said it made the change in order to comply with NAR guidelines, specifically its co-mingling policy.

REX launched in 2015, with the goal of transforming the real estate industry to “push past the outmoded practices of traditional real estate brokers to provide a superior outcome for both buyers and sellers at one-third the cost,” its website claimed.

At the time the lawsuit was filed, REX was a licensed broker active in 19 states. Instead of marketing homes through the MLS, the company used digital technology to market directly to consumers, “using data modeling and machine learning to ‘match sellers and buyers of homes as accurately and speedily as possible on Zillow, Google, Facebook, and other channels,'” according to the court filing. 

REX claimed its model reduced the total commission paid to 3.3% on average, well below the national brokerage rate of around 5.5%. It also estimated that in a five-year period, the company saved consumers more than $29 million in commissions.

Seattle-based real estate startup Flyhomes this week announced it plans to acquire certain assets from Home Sale Assured, a Chicago-area company that helps homeowners move into a new home without needing to sell their current home.

• Founded last year by real estate lending veteran Eric Meadow, Home Sale Assured aims to make it easier for lenders to approve new home loans before the close of a sale on a previous home. Flyhomes offers a similar product called Buy Before You Sell.
• Home Sale Assured is a brand operating within Innovative Holdings, LLC. Flyhomes will acquire the brand, and Meadow is joining Flyhomes as vice president of partnerships.
• Flyhomes, known for its service that helps home-buyers secure purchases with all-cash offers, went through its third round of layoffs earlier this summer amid a slow real estate market. Flyhomes acquired host-to-own platform Loftium in February.

Zillow Group revenue rose slightly to $506 million in the second quarter, well ahead of its prior guidance of $451 million to $479 million for the three months ended June 30, the company reported Wednesday afternoon.

But despite exceeding Wall Street’s expectations and outperforming the overall market, the Seattle-based real estate services and media company continued to feel the effects of higher mortgage rates and a challenging housing market.

• Residential revenue, including Premier Agent advertising services for real estate agents, declined by 3% from a year ago to $380 million for the quarter.
• Mortgages revenue fell 17% to $24 million, which the company attributed to higher mortgage rates impacting demand and its mortgage marketplace.
• Traffic to Zillow Group’s websites and apps slipped 3% to 226 million average monthly unique visitors, with 2.7 billion visits, down 8% from a year ago.

One bright spot: rental revenues rose 28% to $91 million for the quarter, which the company attributed to strong traffic and growth in multifamily properties.

Looking ahead, Zillow Group said in its second-quarter letter to shareholders that its current revenue outlook for the third quarter is $458 million to $486 million. That’s below the average analyst estimate of $488.1 million for the upcoming quarter. Shares fell 2% in after-hours trading, after the earnings report.

Lead by serial entrepreneur Rich Barton as CEO, Zillow Group has been remaking itself since exiting the “iBuyer” home-flipping business in 2021 to focus on core businesses including real estate listings, home loans, and real estate agent advertising. Its brands include Zillow.com, Trulia, StreetEasy and HotPads.

“I’m pleased with our steady progress on improving and integrating our customer and partner experiences, especially in touring, financing, and renting,” Barton said in a statement. “The housing super app is coming into focus, opening up significant transaction TAM [Total Addressable Market] for the company and our shareholders.”

On the bottom line for the second quarter, Zillow Group posted a net loss of $35 million, vs. a profit of $8 million in the same quarter a year ago, as calculated using Generally Accepted Accounting Principles (GAAP).

However, on a non-GAAP basis, adjusted for share-based compensation and other factors, earnings per share were 42 cents, significantly ahead of Wall Street expectations of 18 cents per share, as reported by Yahoo Finance.

Overall revenue of $506 million compared with expectations of $471.6 million.

Seattle-based real estate technology company Zillow is leveraging artificial intelligence to create more immersive listings designed to stand out from the pack and help a home sell faster.

The company’s new “Listing Showcase” experience comes from ShowingTime+, a brand under the Zillow Group banner, and relies heavily on photography features and interactive floor plans to bolster online home listing viewing.

Some of the highlights include:

• Immersive interactive floor plan to allows buyers to fully understand a home layout.
• Seamless toggle between photos, the interactive floor plan and a virtual tour. 
• Highlighted floor plan overlay to connect the photos to their location in the home.
• Media grouped by room for easy navigation.
• Self-rotating high-res photo carousel.

To build the Showcase listings, AI is used to select so-called “hero images.” Trulia, another Zillow brand, explained what hero images are and why they matter in this previous blog post. The images in Showcase listings are based on buyer preferences, and they are connected to corresponding rooms in the interactive floor plan or room-by-room displays.

Zillow said in a Tuesday news release that the experience will improve as new functionality and AI-enabled features become available in the coming months. For example, listing agents will soon be able to select from AI-generated insights on which home facts and features matter most to home shoppers, to highlight those features in a listing.

“As soon as shoppers land on a Showcase listing, they’ll be virtually transported into the home, giving them a deep understanding of the home’s flow, architecture and design — all before visiting in person,” said Mike Lane, vice president of ShowingTime+, in a statement.

The first iteration of Listing Showcase is available in Atlanta, Chicago, Los Angeles, San Diego and Seattle. The offering will be sold by subscription and be available to a select number of listing agents in each market.

In its latest quarterly earnings report in May, Zillow beat estimates for Q1 revenue as it continues to deal with a slumping housing market. Since abandoning its big bet on iBuying, Zillow has shifted its focus to building a “housing super app” that addresses various aspect of real estate including buying, selling, and renting.

“Our goal is to increase engagement, customer transactions, and revenue per customer transaction by investing across five growth pillars: touring, financing, seller solutions, enhancing our partner network, and integrating our services,” CEO Rich Barton wrote in a shareholders letter at the time.

The News: Seattle startup Picket Homes raised $20 million to boost development of its platform that helps investors analyze, purchase and manage single-family rental properties.

The Product: Picket Homes’ platform features more than 50 million US single-family properties in 25 rental markets. Using machine-trained models and data, it helps investors sift through real estate property listings. The platform provides reports that forecast sale/rental values, expenses, cash flow, and long-term asset appreciation. It also facilitates transactions.

When investors purchase a property, their assets move to Picket’s property management system. The platform offers digital leasing, smart home tech, online bill pay and maintenance requests. It also provides access to a service team and mobile app for residents.

Leadership: The company was launched in 2019 by co-founder and CEO Quinten “Q” Shay. He previously served as the co-CEO of Ador, the well-funded Seattle e-commerce startup originally known as Lockerz, which was acquired by Chinese holding company LightInTheBox in 2014. Shay also held leadership positions in Amazon’s international and tech teams, working for more than six years with the e-commerce giant.

Shay is joined by co-founder and president Henchman LeMaistre, who launched tech-focused property management firm Elara, and co-founder and CPO Charlie Mullan, who helped launch influencer affiliate marketing startup Spangle. Picket has more than 100 employees.

Funders: The Series B financing round was led by LL Funds. It included participation from RET Ventures, which led Picket’s Series A round in 2022. The company did not disclose its total funding to date.

Traction: Picket facilitated more than $270 million in single-family rental home investments last year, primarily with institutional customers. The company said it plans to expand by targeting individual investors.

Picket said purchases on the platform have been concentrated in the Southeast. However, the company added that it’s “rapidly expanding” in the Southwest, Midwest, and Northeast. 

The startup generates revenue through its software platform and brokerage and property management services. It said its investor pool has “grown rapidly” in the last 18 months, and its tech and property management services serve “thousands of residents.”

Pushback: Real estate investing companies have faced criticism in the past. Critics argue their business models help investors gobble up the limited amount of available housing, driving up costs and outbidding first-time home buyers.

Asked about these concerns, a spokesperson pointed to data released last week from John Burns Research and Consulting that shows the cost disparity between owning and renting has risen to an average of $1,030 per month, compared to $884 a year ago. The spokesperson added that its broader mission is to help renters have better rental experiences, driven by its resident mobile app and services team.

“When people want or need to rent a home, we want them to have more and better options,” the company said in an email. “We believe that only by facilitating the acquisition and management of rental properties at scale can we have a meaningful influence over the quality of supply.”

Competition: Several real estate investing startups focus on single-family homes. Seattle-based Havium sells a platform for identifying and managing rental properties, while Arrived Homes allows investors to purchase fractional shares of rental properties.

Real estate market: Picket’s funding comes as higher interest rates have weakened investor appetite for buying homes. Investors purchased nearly 49% fewer properties in the first quarter of 2023 than the year-ago period, according to a report by Redfin. The share of single-family home purchases dropped to 67.3% of investor purchases, the lowest share in the past six years, the report found.

There are also fewer homes for sale. The US housing market was short 6.5 million homes between 2012 to 2022, CNN Business reported. As of April, the monthly supply of homes on the market would last 7.6 months if no new houses were built, according to Federal Reserve data.

The share of U.S. homebuyers making all-cash purchases hit a decade-high in April, with one-third of buyers bypassing mortgage loan options, according to a Redfin report released Wednesday.

All-cash purchases accounted for 33% of home purchases in April, up from 30% a year earlier, Redfin found.

Redfin analyzed county records across 40 of the most populous U.S. metros through 2011. It defines an all-cash purchase as a transaction without any mortgage loan information on the deed.

All-cash offers were most common in Cleveland, West Palm Beach, and Baltimore. They were least common in April in Seattle and the Bay Area — expensive West Coast metro areas. In Seattle, 18.6% of homes were bought with all-cash offers, compared to 65.7% in Cleveland.

Redfin said all-cash purchasers are grabbing a larger chunk of homes because rates deter mortgage-dependent buyers more than all-cash buyers.

In early June, the 30-year fixed mortgage rate stood at 6.79%, approaching its highest level in 15 years.

Costlier mortgages discourage homeowners with fixed rates from selling their homes and prevents many would-be homebuyers from entering the market.

The typical U.S. homebuyer down payment was $52,500 in April, down 18% from a year prior, Redfin found. Down payments have been declining on a year-over-year basis since November due to three reasons, according to Redfin: “less competition among homebuyers, high mortgage rates and declining home prices.”

Redfin Senior Economist Sheharyar Bokhari said homebuyers who are in the position to make an all-cash offer face two choices: they can pay in cash to avoid hefty monthly interest payments, or get a loan and invest the extra cash in assets that return enough to offset the higher fees.

He added that homebuyers who cannot afford to make an all-cash offer have two choices: they can drop out of the housing market altogether, or accept the pricier mortgage rate.

In an already sluggish housing market, the rising trend toward cash payments could further weaken demand for startups selling mortgage products.

Seattle-based mortgage startup Tomo, which raised $110 million, laid off 44 employees last year as a result of higher interest rates. New York-based digital mortgage lender Better has also struggled.

Zillow Group’s mortgage business saw revenue decline 43% to $26 million in the first quarter.

After predicting that the sluggish housing market had started to rebound in January, Redfin this week blamed real estate market conditions as part of the reason for its latest round of layoffs.

The Seattle real estate company downsized on Tuesday by 201 employees, or about 4% of its workforce, marking its third round of cuts in less than a year.

The layoffs come despite the company’s declaration at the beginning of the year that the housing market had begun to recover. “We’re not out of the woods yet, but homebuyers are coming off the sidelines,” Redfin deputy chief economist Taylor Marr wrote. He cited increases in the number of users requesting tours and contacting agents to start the home-buying process.

Redfin CEO Glenn Kelman said during the company’s first quarter earnings that tour scheduling, a “leading indicator” of market trends, was on the rise. Tour requests experienced a year-over-year decline of 40% in November, whereas in January and February, the decline was around the 20% range.

After the market “bottomed out” in November, when mortgage rates were over 7%, buyer demand started to return when rates eased, Alina Ptaszynski, a Redfin senior communications manager, told GeekWire on Thursday. But as the year goes on, buyers are struggling to find homes because rate-locked sellers are holding back and constraining transaction volume, she added.

“At that time, we also acknowledged then that we weren’t out of the woods yet and the market was still touch and go,” Ptaszynski said. “We stand by that and continue to track and report on the market weekly.”

The company has consistently cited lagging supply as a key factor in declining home sales. In a report released Thursday, Redfin data journalist Dana Anderson wrote: “People are reluctant to sell because they don’t want to give up their low mortgage rate, it’s hard to find another home to buy and many Americans recently moved.”

For eight consecutive months, new listings of U.S. homes for sale have been declining at double-digit rates, with a 25% drop from the same period last year in the four weeks ended April 9, the report found.

Stubborn inflation, high interest rates, and a crisis in confidence in the banking system are also keeping many would-be buyers and sellers sidelined, the spokesperson noted.

Thirty-year fixed mortgage rates dropped to 6.3% in the period ended April 7. That was the fifth consecutive weekly decline and the lowest levels reached in two months. The rates are still higher than pandemic lows, when rates dropped to the 3% range.

Redfin said last year that it expected the market in 2023 to contract 30% from 2021 during its third quarter earnings announcement. That expectation has not changed and the company believes that sales could remain sluggish into 2024, Ptaszynski said.

Other forecasters have reported conflicting predictions for home values in 2023. Zillow economists predict a 0.5% increase in home prices between January 2023 and January 2024. Meanwhile, economists at Moody’s Analytics expect prices to drop 4.2% between December 2022 and December 2023.

Redfin has already made a series of cost-cutting measures in response to its predictions of a declining housing market. The company said last November that it would wind down its home-flipping program RedfinNow and eliminate 862 positions, or 13% of its workforce. That came after an 8% workforce reduction last June.

Redfin revenue fell 25% in the fourth quarter. The company also reported a net loss of $61.9 million, compared to $27 million in the year-ago quarter.

Housing market conditions have not been uniform in various geographies. Some local markets are performing even weaker than national numbers, leaving excess staffing in those areas, Ptaszynski said.

“That being said, there are some markets that are doing better than the national numbers, but we need to staff appropriately and respond to economic conditions,” Ptaszynski said.

Redfin laid off 201 employees, or about 4% of its workforce, on Tuesday as it continues to trim expenses in response to the housing downturn and ongoing economic uncertainty.

A company spokesperson confirmed the cuts to GeekWire on Wednesday. This is the third time in less than a year the Seattle real estate company has conducted a workforce reduction.

“While another layoff is painful, especially for those leaving the company, Redfin must continue to adapt to the current economic climate,” the spokesperson said in a statement.

Redfin said last November that it would wind down its home-flipping program RedfinNow and eliminate 862 positions, or 13% of its workforce. That came after an 8% workforce reduction last June.

Redfin revenue fell 25% in the fourth quarter after mortgage rates and a sluggish market kept many buyers and sellers on the sidelines. The company also reported a net loss of $61.9 million, compared to $27 million in the year-ago quarter.

The layoffs come despite Redfin’s statement in January that the housing market had begun to recover. That report cited increases in the number of users requesting tours and contacting agents to start the home-buying process.

The most recent round of cuts will mostly affect workers in the real estate support segment. Laid off employees will receive 10-15 weeks of severance depending on tenure and healthcare coverage for three months, according to the spokesperson.

A number of real estate tech companies have laid off employees in Washington state over the last year in response to the market downturn including Zillow, Flyhomes, Compass, and others.

The University of Washington will move ahead with a building envisioned as a gateway into a reimagined part of its Seattle campus after prevailing in a lawsuit brought by a prominent developer.

Alexandria Real Estate Equities Inc. (ARE) filed three claims against the UW in Thurston County Superior Court in Olympia, Wash. Last Friday, Judge Carol Murphy sided with the university (see ruling below) in finding that ARE’s final claim “lacks standing as a disappointed bidder” in its quest to develop a building currently referred to as W27, which will house research centers in clean energy, medical science and more.

Pasadena, Calif.-based ARE, which has significant properties and investments in the Seattle region, participated in the request for quotation (RFQ) and request for proposal (RFP) processes and was one of two finalists for the project.

The UW chose Baltimore-based Wexford Science + Technology to develop the project. The two parties entered into lease contracts in which Wexford will design, finance, construct and maintain the new facility, and lease back roughly 100,000 square feet of space to the UW. Wexford has 17 “knowledge communities” in its development portfolio.

ARE first filed suit in June 2021, disputing the UW’s development RFP process. It also filed a request for a preliminary injunction that was dismissed by Murphy.

The judge concluded that the process for selecting a developer “was not arbitrary” and was “thoughtful, robust and ultimately fair.”

ARE has partnered with the UW going back to 1998, according to the court ruling.

“We absolutely intend to appeal,” said Joel Marcus, ARE executive chairman and founder, in an emailed statement to GeekWire on Wednesday.

The UW rejoiced at the closing of the ongoing dispute — which it referred to as a “nearly two-year effort by ARE to delay the project.”

“We feel buoyed by the court’s decision, which reinforces the legitimacy and professionalism of our selection process and clears the path for us to move ahead with this pivotal development,” Lou Cariello, UW’s vice president for facilities, said in a statement provided by the university. “At the same time, we are disappointed that ARE engaged in this legal approach, which has already resulted in significant costs to taxpayers in attorney fees, increased costs, and delays to the project.”

Update: The UW expressed disappointment Thursday in ARE’s plans to appeal the ruling.

“ARE has failed on all three claims and it is disappointing that ARE may appeal the Court’s clear and decisive decision and prolong this wasteful process,” UW spokesperson Victor Balta said. “ARE’s continuation of this effort is an affront to the taxpayers of the state of Washington and disruptive to the UW’s public mission.”

The UW envisions W27 as a gateway into what it’s calling Portage Bay Crossing, a neighborhood in the university’s west campus that will “merge education and student life with cutting-edge research, pioneering public/nonprofit institutions and private companies.”

The 340,000-square-foot, 11-story building will be located at 3919 University Way N.E.. The UW said it will be home to both academic and private research laboratories and offices, the Washington Clean Energy Testbeds, a rooftop solar panel testing area, the Institute for Protein Design and the Brotman Baty Institute. It will also house Connect Labs by Wexford Science + Technology.

Alexandria is a dominant player in life sciences real estate. Its buildings house operations for some of the Seattle area’s biggest biotech companies, including Seattle-based Sana Biotechnology and Bothell-based Seagen. ARE is developing a life sciences hub at Seattle’s almost three-acre Mercer Mega Block. 

The Puget Sound Business Journal reported that the firm’s 432-property North American portfolio totals nearly 41.5 million square feet and generates over $2 billion in annual revenue. In the Seattle area it owns 46 properties totaling 2.8 million square feet, generating $109 million in annual revenue, according to the Journal.

Thurston County Superior Co… by Kurt Schlosser

A new report commissioned by Challenge Seattle, a coalition of business and tech leaders, says more companies need to help finance and build affordable housing as part of a comprehensive solution to the state’s housing crisis.

Examples include private companies developing housing themselves, donating or discounting surplus land for non-profit developers or community land trusts, or providing below-market financing or grants to encourage new housing.

“Large private companies based in areas with high housing costs have an interest in their workforce’s housing availability and costs, and therefore have a strong reason to be part of the solution,” the report says.

That’s one of the takeaways from the 125-page report, “The Conspicuous Crisis: Addressing Housing Affordability in Washington,” released Thursday morning, produced by the Boston Consulting Group for Challenge Seattle.

It’s a follow-up to a widely cited BCG report in 2019 that laid the groundwork for Microsoft, Amazon, and others to commit hundreds of millions of dollars to finance affordable housing in the Seattle region. Apple, Google, and others have likewise launched their own commitments and initiatives in California.

The new report acknowledges those efforts, in addition to new state laws and local policies addressing housing affordability and homelessness.

However, the report says the problem is outpacing efforts to solve it, with a disproportionate impact on people of color, compounding the history of racial discrimination in home ownership.

“Given that these initiatives were all implemented recently, it is too early to definitively state their impacts on housing affordability,” writes Challenge Seattle in an introduction to the report. “But we do know that based on the magnitude of the crisis, these actions alone will not be sufficient to address the challenge we face.”

The new report expands on the 2019 study by taking a statewide approach — finding, for example, that nearly 1 million Washington state households spend more than 30% of household income on housing related costs.

Increasing the role of private companies is one of 19 recommendations in the report to boost the housing supply and make housing more affordable and accessible to middle- and low-income households.

But the biggest focus is on increasing residential density through zoning reform. The report notes, for example, that more than 90% of Mercer Island and more than 70% of Seattle and Bellevue are zoned for single-family homes.

“Zoning reform is the critical enabler for removing regulatory barriers standing in the way of the private market producing more housing units,” writes Challenge Seattle. “In the context of Washington, we would need to change zoning laws to allow for more density and re-zone more land for multi-family residential uses.”

Challenge Seattle is led by CEO Chris Gregoire, the former Washington state governor. Members include Microsoft CEO Satya Nadella, Expedia Group CEO Peter Kern, Puget Sound Energy CEO Mary Kipp, T-Mobile CEO Mike Sievert, Zillow Group CEO Rich Barton, and leaders of other companies across the region.

Read the full report here.

Newly released renderings show a building planned for the west campus of the University of Washington in Seattle that will be home to research centers in clean energy, medical science and more.

The project, previously announced in March and currently known as W27, is envisioned as a gateway into the recently named Portage Bay Crossing. The UW refers to this area as “a dynamic and interdisciplinary urban community” that will “merge education and student life with cutting-edge research, pioneering public/nonprofit institutions and private companies.”

The 340,000-square-foot, 11-story building will be located at 3919 University Way N.E.. The UW said it will be home to both academic and private research laboratories and offices, the Washington Clean Energy Testbeds, a rooftop solar panel testing area, the Institute for Protein Design and the Brotman Baty Institute. It will also house Connect Labs by Wexford Science + Technology, the developer on the project.

“The dynamic environment in this new space will unleash Washington students, faculty and companies to create home-grown technologies that can scale solutions to address the climate crisis,” Daniel Schwartz, director of the Clean Energy Institute and professor of chemical engineering, said in a statement.

The first two floors of the building are referred to as the understory, and will provide multiple indoor/outdoor amenity areas that are covered and shaded. The upper floors, 3 to 11, have a crenelated facade to both maximize views and decrease solar heat gain. Plans include a cascading open lobby and event space, public art, conference rooms and two restaurant spaces.

The site also includes green space with plazas, a mid-block crossing connecting University Way N.E. and Brooklyn Avenue N.E., large gathering areas, and improved Burke-Gilman Trail access and functionality, the UW said in a news release.

The design is nearly complete and currently being reviewed for permits by the City of Seattle. The name of the building will be announced in the coming months.

Zillow Group announced Thursday that it acquired Milwaukee, Wis.-based marketing service VRX Media, a move that broadens its suite of listing services it sells to agents and brokers.

VRX offers real estate-focused content such as aerial drone photography, virtual staging, 3D tours, and high-definition images. The company operates in more than 60 U.S. metros. It was founded in 2015 by former real estate agents Seth Green and Nathan Strom. VRX’s services will be released alongside Zillow’s other offerings in 2023.

Terms of the deal were not disclosed. The purchase marks Zillow’s 18th acquisition to date.

Zillow CEO Rich Barton wrote in his third quarter letter to shareholders that the company was bundling its real estate listing services under one umbrella brand called ShowingTime+. The company has been able to assemble the pieces for the suite of services through a series of acquisitions and in-house development. The new bundle includes:

• Dotloop, software that helps real estate brokerages manage documents digitally. (acquired in 2015)
• Bridge Interactive, a listing data management service. (acquired in 2016)
• ShowingTime, a software to facilitate home showings. (acquired in 2021)
• Rich Media Technology, an AI-generated floor plans and 3D home tours.
• VRX Media (2022)

“We expect the combination of ShowingTime+’s software capabilities and Zillow’s audience reach and proprietary technologies to allow us to access listing agent wallet share through both software and marketing spend, further broadening our reach within the addressable market we are going after,” Barton wrote in the shareholder letter.

Zillow has struggled amid the broader housing market downturn, with its stock down more than 43% since the start of the year. In a series of cost-cutting measures, the company confirmed in October that it laid off around 300 employees. It also said that it would tighten discretionary spend and reduce marketing costs.

The U.S. housing market continues to show signs of weakening, impacting Seattle real estate tech companies such as Zillow Group and Redfin. And the trend may continue.

“We think that the housing market could get worse,” Redfin CEO Glenn Kelman said during the company’s earnings call Wednesday. “We haven’t seen U.S. home sales dip below 4 million units a year in decades — and the U.S. population has grown.”

Redfin missed its third quarter earnings expectations and earlier Wednesday announced it would lay off employees for the second time this year, eliminating 862 positions, or 13% of its workforce.

The company also said it plans to shut down its home-flipping “iBuying” program RedfinNow.

The cost-cutting measures are a response to a broader housing market downturn due in part to rising inflation and mortgage rates. Single-family housing starts, which indicates the groundbreaking of a new home foundation, dropped nearly 19% in September. The amount of building permits allocated fell 17%. And existing-home sales are down nearly 24% from the same period last year.

“We plan to keep increasing our share of the market, but that market in 2023 is likely to be 30% smaller than it was in 2021,” Kelman wrote in a memo to employees Wednesday. “The June layoff was a response to our expectation that we’d sell fewer houses in 2022; this layoff assumes the downturn will last at least through 2023.”

Redfin axed 8% of its workforce in June. The company’s headcount has dropped 27% since April.

“Housing companies are in the jungle now, but Redfin has been there before and come out stronger,” Kelman said in a press release detailing the earnings.

The Seattle real estate giant reported revenue of $600.5 million through the three months ended Sept. 30 and a net loss per share of $0.83, which both narrowly missed analyst expectations of $603 million and $0.80, respectively.

Redfin stock fell more than 10% Wednesday but bounced back Thursday. Shares are down nearly 90% this year.

The decision to shut down the iBuying program eliminates Redfin’s largest liability and source of cash burn, RBC Capital Markets analyst Brad Erickson wrote on Wednesday. He added, “given the losses across the business and investors’ likely liquidity concerns with $300M of homes still on the balance sheet, it was a critically important decision.”

Redfin is one of a handful of real estate companies that invested heavily in iBuying to make real estate transactions more seamless. But it’s proving to be a difficult business, particularly with the market slowdown.

Zillow Group last year shut down its own iBuyer arm, Zillow Offers, resulting in a $405 million write-down and a 25% workforce reduction. Opendoor, the leading iBuying company, laid off 18% of its workforce earlier this month and reported a nearly $1 billion loss in the third quarter.

In the third quarter, Redfin sold 530 homes through RedfinNow, with an average sale price of $550,903. That accounted for nearly half of its total revenue during the period.

Redfin said it recorded an $18 million write-down related to RedfinNow for its third quarter earnings, “as a result of purchasing homes during 2022 at higher prices than RedfinNow’s current estimates of the values if we were to sell the homes as of September 30, 2022, net of selling costs.”

Redfin’s inventory value of its homes at the end of October was approximately $265 million, with another $92 million under contract to sell, filings show. The company expects to own less than $85 million in homes by the end of January, then completely rid its inventory of homes by the end of the second quarter of 2023. As a result of Redfin liquidating these houses, it will gain about $100 million in cash on its balance sheet, Kelman said.

“Laying off 862 colleagues and friends is heartbreaking,” Redfin CEO Glenn Kelman said in the earnings release. “But I feel relief about closing RedfinNow with relatively low losses.”

During the earnings call, Wedbush Securities analyst Jay McCanless was skeptical of Redfin’s plans to liquidate all of its homes before the third quarter of next year, citing Redfin’s “bearish” view of the overall housing market.

Redfin CFO Chris Nielsen responded by saying that the company is pricing the properties to be competitive to sell but at a price point that provides as much profit as possible.

“Hope is not a strategy here,” Nielsen added. “We’re not waiting for home prices to improve.”

Other highlights from Redfin’s third quarter financials include:

• Its net loss during the quarter was $90.2 million, compared to $18.9 million in the year-ago quarter.
• Mortgage revenue of $48 million was down from $53 million last quarter. However, the total attach rate of Redfin customers also getting a mortgage has grown to 17%, more than double that of last year.
• Website and app traffic rose 3% year-over-year to about 51 million average monthly users.
• Total market share rose to 0.8%, up two basis points from the year-ago period.

DoorDash, the food ordering and delivery company, is expanding its office footprint in Seattle two years after starting an engineering outpost in the city.

The company, which now employs about 600 people in Seattle and Washington state, has moved into a 30,440-square-foot space at the 2+U building at Second Avenue and University Street in downtown Seattle.

DoorDash first announced its plans to set up shop in Seattle in October 2020. The company has been working out of co-working space at 1201 Third Ave.

The new space includes communal workstations, conference rooms, phone booths, a parent’s room, a focus room, all hands space, and a modular room used for training and larger meetings, according to DoorDash.

The office is led by Director of Engineering David Azose, who previously spent three years with Uber in Seattle and more than nine years at Microsoft as a software developer and engineering manager.

“We’re thrilled to call Seattle and the Pacific Northwest home,” Azose said. “With the new expanded office, we hope to attract and welcome talented individuals who are looking to make an impact, while empowering local businesses in Seattle and beyond. Our Seattle hub continues to grow to support key business initiatives as we accelerate into new growth categories and innovate upon our core logistics platform.”

DoorDash is using a flexible work model for its corporate employees in the U.S., allowing teams to decide how best to leverage in-person and remote work.

The Seattle office market “continues to see high vacancy,” at 12.79% in the third quarter, according to a recent report from Kidder Mathews. The commercial real estate firm said future office demand “remains a big question,” adding that “all eyes will continue to be on job growth as well as the positioning of companies to repopulate their spaces which has been at lower density levels than pre-Covid with many employees continuing to work from home or adopt a hybrid model.”

New York-based real estate brokerage Compass has laid off 84 employees based in Washington state as part of a reduction that largely targets the company’s technology workforce.

In a filing with the U.S. Securities and Exchange Commission on Tuesday, Compass said a significant portion of its cuts in headcount would come from the company’s product and engineering team.

A Worker Adjustment and Retraining Notification from the Washington state Employment Security Department on Wednesday put the number at 271 workers, with 84 “local” and 187 “virtual.” A Compass spokesperson said “virtual” employees were remote or spread across the country, but have to be assigned a location, so the Compass system considers them Washington employees.

Amid a cooling U.S. housing market driven by increased mortgage rates, Compass previously stated in an Aug. 15 earnings call that it would be cutting costs in order to achieve profitability in 2023. Seattle-based Redfin also made cuts this summer, laying off 8% of its workforce to address to the housing downturn.

In an email to Compass agents on Tuesday, founder and CEO Robert Reffkin said the company was fortunate to be able to reduce costs while still investing more than any other company in the real estate industry.

“For example, the biggest reduction came from the technology team, however, our technology team is still over 700 people strong and likely larger than every traditional brokerage company’s tech team combined,” Reffkin wrote.

Founded in 2012, heavily funded Compass made a splash in 2019 when it cut the ribbon on a West Coast engineering hub in Seattle, right in Amazon’s backyard.

Reffkin said at the time that big companies like Amazon, Microsoft and the engineering hubs of Facebook and Google that are set up in Seattle drew Compass to the city.

“A lot of big companies have enough people that want to be part of transforming a new industry,” Reffkin said.

In March 2020, Compass laid off about 375 employees due to the onset of the COVID-19 pandemic. Seven months later, Compass acquired Modus, a Seattle startup that automated the title and escrow phase of closing on a home.

After raising more than $1.5 billion from investors, Compass raised another $450 million when it went public in April 2021. The company posted a loss of $494 million that year.

This past June, it shut down Modus, as it began its cost-cutting moves. The company laid off 450 workers, or 10% of its total workforce.

When it comes to co-working spaces in Seattle neighborhoods, Pioneer Square’s loss is Ballard’s gain.

The Pioneer Collective has moved its office and meeting space to the northern end of the city, taking 14,000 square feet in Ballard’s Tommer Building at 5101 14th Ave. NW. The building is in the heart of the neighborhood’s celebrated “Brewery District” and even sits above the Great Notion Brewing taproom.

Pioneer Collective was forced to move out of its flagship home of seven years in 2021 to make way for the development of the Railspur Hotel project in Pioneer Square. The company also operates locations in Belltown and Tacoma.

“Our customers have been asking us to open in North Seattle since 2015,” TPC co-founder Audrey Hoyt said in a news release. “It’s taken years to find the right opportunity, but we couldn’t be happier about where we landed.”

The company credits a “slow and steady strategy,” as well as a diverse product offering, with enabling it to survive tough times for co-working spaces during the COVID-19 pandemic. Revenue streams come from such things as monthly co-working memberships, private offices, meeting and offsite rentals, event space rentals, and mail processing services.

The pandemic was especially hard on co-working spaces. Among the Seattle area’s co-working casualties were Impact Hall, Atlas Networks, The Riveter, Hing Hay Coworks, Ballard Labs and Office Nomads. More than 800 co-working spaces permanently closed their doors nationwide, according to Upsuite, a flexible office space provider.

In August, the co-working space and coding bootcamp Galvanize closed its Seattle location, also in Pioneer Square, after seven years. WeWork closed a Ballard location during the pandemic in 2021 and then reopened the space last March.

The Pioneer Collective offers private one-person offices on up to nine-person offices, with prices starting at $875 a month. Memberships range from $145 for eight drop-ins a month to 24/7 access at $300 per month. More details are available here.

Arrived Homes, a Seattle-based startup that allows investors to buy shares of single-family homes, is adding short-term vacation rental properties to its investing platform.

“We’re thrilled to announce Vacation Rentals launching on Arrived,” the company said in an email to users Wednesday. “Vacation rentals are fully furnished homes that are leased for short-term stays (1-30 days) on platforms like Airbnb & VRBO.”

The company has already listed seven properties designated to be short-term vacation rentals. Investors can buy shares of these homes, which have names like “The Mirage,” which is located in Joshua Tree, Calif., and “The Ace” in Scottsdale, Ariz. These rental property assets total $5 million, the company said.

“Platforms like Airbnb have helped vacation rental owners generate over $150 billion dollars in rental income from serving 1 billion guest arrivals, and yet, less than 0.5% of these guests have been able to access the wealth-building potential of this rapidly growing asset class,” CEO and co-founder Ryan Frazier said in a statement. “We’re changing that today by adding these assets to our platform.”

Arrived has about 100,000 people signed up for its service, with about 10,000 users actively investing. On average, there are about 200-300 investors per house. The startup uses crowdfunding to help these investors purchase shares of rental properties for as little as $100, aiming to democratize real estate investing beyond wealthy individuals and institutional buyers. Investors on the platform can earn passive income while the company handles everything from property acquisition and management.

Investors on the platform have been eager to put their money toward short-term rentals. The Nashville-based vacation rental “The Oasis” sold out all of its shares on the first day of trading on Wednesday and was listed on the trending page on the Arrived website.

The startup aims to expand its offerings across both single-family rentals and vacation rental properties. It also plans to open in new markets such as Florida, Texas, Nevada and Indiana. However, it may face roadblocks as various jurisdictions are cracking down on short-term rentals by enforcing various zoning laws, such as the bill signed by Honolulu Mayor Rick Blangiardi that requires property owners to book their unit for a minimum of 90 days.

Real estate investing platforms, like Arrived, have faced criticism for gobbling up housing supply and driving up prices. The company previously defended its business model by saying that there is a demand for “quality rental housing” for individuals and families who may not have the financial means or incentive to purchase a home, adding that it does not bid on housing stock that would otherwise be owner-occupied.

The startup was founded in 2019 by a trio of tech vets including Frazier, CTO Kenny Cason and COO Alejandro Chouza. Its cap table features high-powered backers including the venture capital arms of Jeff Bezos and Marc Benioff, along with investments from former Zillow Group CEO Spencer Rascoff, and Uber CEO Dara Khosrowshahi, among others.

Arrived has a total inventory of 150 single-family rental properties in 27 markets across the country, totaling more than $55 million in total asset value.

As CEO of Seattle-based real estate company Redfin, Glenn Kelman knows plenty about the realities of the housing market in the United States. Now he knows the reality TV version.

Kelman is one of the buyers on “Buy My House,” a show designed to tap into viewers’ obsession with all things real estate and show what it looks like when homeowners try to sell their properties to industry professionals.

The first six episodes of “Buy My House” are now streaming on Netflix, and the show has been compared to the popular reality series “Shark Tank” — but for real estate. Kelman told GeekWire the show has less bite and is more like “Manatee Tank” for real estate.

“The other real estate entrepreneurs are all lovely, and the people pitching us were often in the middle of a messy, exciting, emotional transition in their lives,” he said. “They’d gotten sick or their kids left home or they’d run out of money or they were selling everything to go off on a big adventure.

“What we were evaluating wasn’t an off-the-wall idea to program pillows with an iPhone; it was someone’s home,” Kelman added. “It gave the show more heart.”

Kelman, who has led Redfin for 17 years, is joined on the show by fellow “tycoons” Brandon Copeland, an Atlanta Falcons linebacker; Corcoran Group President and CEO Pamela Liebman; and financial property specialist Danisha Wrighster. TV personality Nina Parker serves as host.

Each 30-minute episode features four pitches to the pros by homeowners from all over the U.S. Looking to make a deal on the spot, each homeowner tells the story behind why they are selling and weighs the offers from the investors.

Redfin was approached by a production company called Critical Content in 2019 when the company was putting together a pitch to sell the show to Amazon or Netflix. Kelman thinks he was chosen for his title as CEO, but he initially declined because he said he can’t even stand the sound of his own voice in a message. He changed his mind when he pictured a Redfin competitor taking the spot instead.

“Redfin still isn’t the most well-known name in real estate, so part of my job is to spread the word,” Kelman said. “Underdogs have to take more chances.”

A trailer for the series (above) calls Kelman a real estate mogul who is “changing the way America buys and sells homes with his revolutionary company, Redfin.”

In the first episode, titled “The Algorithm,” Kelman bids $730,000 on an Austin, Texas, couple’s home, and then raises his bid to $775,000 to secure the win. Liebman calls him a “shrewd deal maker” and says he’ll probably flip the house for $875,000.

Kelman said “seeing how the sausage was made” by a crew that came together from all over the world was the most interesting part of being on TV. In a series of tweets last week, he detailed more of his experience on the show and some behind-the-scenes nuggets.

Kelman said Redfin bought a bunch of houses on the show and sold them. He credited RedfinNow, the company’s direct home-buying business and the employees within that business with helping him look like a seasoned investor on the show.

Those employees supplied Kelman with data and local expertise about the neighborhoods where he and Redfin were buying homes. With his own money, he donated to a ministry and invested in a company that builds houses out of compressed earthen blocks.

“It would’ve made a better show if Redfin had bought more of the outlandish homes, a winery or a golfing complex, but the middle-class places with standard layouts are easier to price and trade,” Kelman wrote in his own recap of the experience.

Flyhomes is the latest tech startup to cut jobs.

The Seattle real estate company laid off approximately 20% of its staff, a spokesperson confirmed to GeekWire. The company did not provide an updated headcount. It has 763 employees, according to LinkedIn. One employee said 200 workers were let go.

Tech firms across various industries are laying off employees or freezing hiring as a way to curb expenses amid the current downturn. Rising interest rates are affecting U.S. home sales, which has forced real estate companies such as Flyhomes and others to trim headcount.

Flyhomes cited the impact of interest rate increases on demand for housing in a statement about its layoffs.

“To build the world’s best home buying and selling experience, we must operate in a manner that is both fiscally prudent and sustainable in the face of uncertain economic conditions,” the company said.

Redfin, another Seattle real estate company, laid off 8% of its workforce last month. Compass also cut jobs and shut down its Seattle-based title business.

Other Seattle-area tech startups including Convoy, Qumulo, and Esper have laid off employees in recent months. Google is freezing hiring for two weeks, The Information reported Wednesday.

Founded in 2016, Flyhomes helps people buy homes using a cash offer program which presents customers as the equivalent of cash buyers. A majority of the company’s revenue comes from agent commissions.

The startup also offers mortgage services and has a Buy Before You Sell program that helps sellers buy and move into their next home before selling their current property.

Flyhomes has helped customers buy nearly $3 billion worth of homes.

The company is led by CEO and co-founder Tushar Garg. It has raised more than $200 million to date, including a $150 million Series C round raised in June 2021. Investors include Norwest Venture Partners, Battery Ventures, Fifth Wall, Camber Creek, Balyasny Asset Management, Andreessen Horowitz, Canvas Partners, and former Zillow Group CEO Spencer Rascoff.