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Compass spends $135 Million in office space. Does that make financial sense?

When Compass announced an aggressive cost-cutting strategy, one of the places expected to get a hard look was its office rental space.

After all, closing an office doesn’t require many layoffs, and in some regions, the firm has several prime locations within minutes of each other. Some of those leases were signed when rents were at its peak..

But sources said the company isn’t reducing its physical footprint, despite looking to cut roughly $320 million from its budget.

According to Compass, closing offices doesn’t necessarily save money up front, as there are termination lease fees for long-term leases.

The number of offices has since grown to 427 staffed full-time, according to Compass’ website, and another 85 satellite offices staffed part-time that aren’t listed on the site, according to data provided by a company representative. The company now has nearly 13,000 “principal agents,” defined by the company as team leaders or individual agents operating independently on the Compass platform, up 22 percent year-over-year. Overall, the company has about 28,000 agents.

As the number of spaces has grown, so has the cost to keep them open. According to Compass’ 2021 annual filing, it spent $135 million on office leases last year, up from $122 million in 2020. Its future lease liabilities at the end of last year totaled more than $564 million.

And it doesn’t plan on closing many offices. Compass said it closed a net of eight offices this year, and that plans for those closures date back to last year, before the market shifted and cost-cutting was announced.

The brokerage’s office footprint is heavily concentrated in three states: California (140), Florida (62) and New York (57). In California, its offices are mostly in and around San Francisco and Los Angeles. It also has a sizable foothold in secondary markets like Rhode Island, where it has 12 offices, and Cape Cod, Massachusetts, where it has more than 20.