BEIJING, October 20 (TMTPost) -- All of 30 architecture  design institutions owned by property developer Country Garden have been dissolved, leading to the layoffs of 2,000 employees.

Prior to the resignation of the chairman of Gemdale Group, there were also reports of large-scale layoffs in its regional companies across the country. For real estate companies, this seems to have become commonplace, but still lamentable.

In recent years, whether it is former industry giants or leading real estate companies, they have all experienced a series of personnel adjustments and structural reorganizations. The real estate industry is undergoing unprecedented changes, and "survival" has become the main theme for major real estate companies. Each company is facing different challenges and opportunities. Especially for highly leveraged companies that have experienced a catastrophic crisis, the majority of them have not yet found a solution, and many companies are still deeply mired. In this situation, downsizing has become inevitable for real estate companies to save themselves.

At least 260,000 employees in real estate industry lose jobs  

According to the mid-year reports of major real estate companies, most of them experienced a decline in profits or even losses in the first half of 2023, and the number of employees and their compensation and benefits also changed accordingly. Among the 29 typical real estate companies compiled and analyzed by Sohu Finance, 22 companies reduced their workforce, with a total reduction of nearly 28,000 employees; 7 companies increased their workforce, mainly state-owned enterprises, with a total increase of nearly 13,000 employees (among them, the increase in the number of employees in Evergrande in the first half of the year was mainly due to Evergrande Property, with the number of employees increasing from 72,000 at the end of 2022 to 82,800, an increase of over 10,000; however, the number of employees in Evergrande Auto decreased from 4,506 to 1,597).

However, the above is only the tip of the iceberg in recent years, and even only a small part of what is known in the first half of the year. According to the "2022 China Real Estate Organizational Strength and Employer Influence Research Report," the overall reduction in staff of the top 100 real estate companies (without accidents) in 2022 was 28.88%. TiPost International Think Tank found that among the 58 typical listed real estate companies in 2022, a total of 50 companies reduced their staff, with a total reduction of over 230,000 people.

Among them, the reduction in staff of accident-prone real estate companies is more prominent. Six companies have reduced their staff by more than 10,000: including Longfor (12,600), Jinke (18,000), Evergrande (18,500), Zhongnan (18,700), Sunac (27,200), and Country Garden (30,800). Most real estate companies have a staff reduction rate between 20% and 40%, but some companies have a staff reduction rate of over 50%. Seven companies have a staff reduction rate of over half: Jinke (73%), Yuexiu (73%), Sunac (66%), Zhongliang (57%), Times China (55%), Zhongnan (52%), and Rongxin (50%). Most real estate companies that can maintain a positive growth in staff numbers have a background in state-owned enterprises, such as China Vanke, Yuexiu, China Resources, and Poly.

In summary, according to incomplete statistics, in the year and a half from 2022 to the first half of 2023, known real estate companies have reduced their staff by 260,000 people. This does not include most undisclosed/unaccounted for data, or even real estate companies that have completely disappeared from the public eye.

The number of 260,000 is only a small part of what we know, and there are still more real estate professionals who have not been counted and have quietly left.

Consolidating cash flow and maintaining profits has become the top priority for real estate companies at this stage. They need to store grain for the winter and reduce costs while increasing efficiency. In the context of regulation, these troubled real estate companies face various problems such as difficulty in financing and sales scale falling short of expectations. As a result, wave after wave of streamlining and optimization measures have emerged. Personnel adjustment is the most commonly used method to reduce operating costs. The reduction in the number of employees is reflected in the financial statements, and the most intuitive changes are seen in administrative expenses, employee welfare expenses, and employee costs.

Take Sunac as an example. The profit indicators for 2022 have improved, with gross profit and net profit attributable to the parent company both narrowing losses. Among them, administrative expenses are a major influencing factor, decreasing from 8.428 billion yuan in 2021 to 6.938 billion yuan, saving 1.5 billion yuan directly.

In the past period of time, real estate companies have carried out layoffs or downsizing under the pretext of organizational structure adjustment and personnel optimization, or they have reduced salaries, benefits, and increased performance assessment requirements, or they have used relocation of office locations as a means to indirectly make employees leave voluntarily. Currently, there are three main models for streamlining the organizational structure of real estate companies:

1. Regional deepening to create a flat organizational structure.

Further deepen regional integration or fission, and classify and govern based on the characteristics of different regional markets; strengthen the management function of regional project clusters, with a focus on engineering and operation authorization; take projects/project clusters as the core operating entities; the overall structure tends to be flatter, weakening or canceling the management attributes of regional platforms.

2. Establish regional shared centers and enhance product upgrading.

Strengthen the importance of products in strategic undertakings and establish regional technology sharing platforms. Through product upgrading, city upgrading, and cost-intensive management, optimize the waist-level organization to undertake product upgrading strategies and ensure the effective implementation of group strategies.

3. Implementing a large department management system and strengthening regional platforms.

The headquarters is implementing a large-scale reform to improve operational efficiency, with non-crossing functions and non-repetitive management. It strengthens the management function of regional platforms, further promotes the standardization of group management, eliminates or reduces single-city companies, and promotes the integration of multi-city platforms.

From high-paying jobs to median ones

Real estate was indeed recognized as a high-paying industry, standing at the pinnacle of the pyramid along with the Internet, finance, and other industries. Many practitioners in the real estate industry have earned huge wealth. During the boom in the real estate market, fixed salaries were only a small part of the income for real estate practitioners. They earned more from performance-based incentives and investment participation. For example, after the successful acquisition of land by the investment department of a real estate company, there would be a land acquisition bonus as an incentive for the staff involved in the acquisition. Many real estate companies use investment participation as an incentive to improve project development efficiency, linking employee income to project profits and losses, greatly increasing employee engagement. Investment participation has become an important source of income for real estate company employees.

However, after experiencing a weak period in the real estate market in recent years, the overall compensation level of real estate companies has significantly decreased. According to statistics compiled by Sohu Finance from 21 typical real estate companies, 15 of them have reduced employee benefits, with reductions ranging from 10% to 40%, and Times China's salary and benefits have dropped by nearly 70%. The average monthly income of Evergrande employees is only 4200 yuan, which includes wages, bonuses, various allowances, retirement plans, and social insurance, so the actual take-home income for employees is very low.

These real estate practitioners who deeply participate in every change in the property market have witnessed the glory and experienced the downturn of the market. When the overall environment is not so optimistic, some choose to stay while others choose to leave. However, it is undeniable that the sharp decline in the number of real estate practitioners and the decrease in salary and benefits are real and present. As a former member of the real estate industry, seeing the data cannot help but sigh.

From the current situation, it is indeed difficult to judge the risks and benefits of each choice. Because whether it is the real estate industry or other industries, they are all filled with "uncertainty". Each person can only make choices based on their existing resources and experience. Some people switch from private enterprises to state-owned enterprises, only to find that the system is more closed and the stability is not as high as imagined; some people rely on their marketing and planning experience to switch to the home decoration industry; many people choose to work in insurance, and some start focusing on new media... It is difficult to imagine what kind of opportunity led to the final choice.

For real estate practitioners who are dissatisfied with the current situation, there are only three choices:

1. Stay in the real estate industry and look for a more suitable and relatively stable real estate company.

2. Enter related industries upstream and downstream of real estate to find opportunities for experience transfer on the edge of the industry.

3. Completely leave the real estate industry and choose a new track to start from scratch.

For practitioners with many years of experience, it does take a lot of courage to make a change. However, in the face of great uncertainty in the future, one must also maintain an open attitude towards opportunities, constantly match their own understanding, remain sensitive to new things and trends, and explore new opportunities; continue to improve, be prepared at all times, and expand and accumulate more experience and knowledge; if there is no clear direction, it is better to stay put in the current position, so that one's work experience and efforts can maintain the highest value realization ability, which may be the best choice for most people.

(This article was first published on the TiPost App. Author | Zhao Chenhan)