First, they ignore you. Then they laugh at you. Then they fight you. Then you win – Mahatma Gandhi (possibly).
Like the misquote above, I’m sometimes wrongly slated by the property industry for forecasting the total eradication of estate agents from our high streets. It’s a warm, comforting thought for some but it’s not actually something I believe will happen or have ever said, even despite the relentless advance of the new, digital estate agent.
There are though, 25,500 estate agency branches across our nation says AllAgents.co.uk the country’s biggest customer review property website. The number has grown relentlessly since the recovery in the property market post-2008 and is now back to a high. Estate agency is comprised mainly of smaller independent, owner-operated businesses and, in fact, the UK’s largest estate agent, Countrywide PLC has a mere 6% market share despite having well over 1000 outlets under multiple brands including Mann & Co; Bairstow Eves; John D Wood; Greene and Co and Abbotts.
In recent years, particularly in the last twelve months or so, my industry has begun to change. Several of us have begun to stretch our legs with a lower fee proposition, much lower in fact; and a technology-driven approach coupled with ultra-high levels of customer service that are unmatched by the establishment.
To think that the original dinosaur was wiped out without a trace by a massive meteor coming out of nowhere. A ‘future event’ unforeseen by a complacent, unsuspecting incumbency that had carried on as always right up to the point of destruction. Of course, I make no smart comparison here at all.
Online estate agents, or hybrid agents as some are known, now command a 5% market share and are winning inventory from their high street cousins at a rapid rate. Rightmove’s Miles Shipside, its Commercial Director, recently told me that their own numbers demonstrate a doubling in activity from the new breed of digital agents in just the last two years. 100% growth every two years extrapolates to a 20% share of the country’s property listings by 2020, a segment worth over £5bn each year in fees.
Clearly, that level of customer grab can only be at the expense of the incumbency.
So what do the current crop of traditional agencies do now? With their multiple premises and staff, a fixed cost base that increases year on year as rents, business rates and wages rise…
Well, it has to be said that the swift expansion of branch offices over the last seven years, fuelled by rising house prices and volumes may now be coming to a shuddering halt. And before you shout ‘BREXIT!’, no, it’s way too early to call that as a reason for what’s happening although some property firms are using the EU vote as an excuse for the consolidation that is now taking place rapidly. Foxtons especially. And LSL.
Since March there have been a spattering of comments, announcements and, in the case of listed businesses that have to report such things, formal statements by established agencies that indicate a crumbling of those high street foundations.
In November 2015 Countrywide issued a profit warning stating that income would be down drastically on the year prior. It blamed ‘short-term pressures’ and also the ‘continuing downward influence on fees by so-called online agents’. Then, in February this year, it posted a drop in profits of a colossal 37% (£30m).
Shares in the quoted UK behemoth have lost 54% of their value in the past year. An eye-watering drop in value of HALF A BILLION POUNDS. And, tellingly, rumours this week of a cull of up to 200 Countrywide office premises are being played down but at least partly admitted.
|Share Price 12 Months Ago (27th July 2015)||Share Price Today (25th July 2016)||Current Value of Company||Difference in Share Price||Market Cap 12 Months Ago||Difference In Share Price|
Foxtons fare no better. In February it issued a bullish revenue figure, up 4% year on year. However, a glance under the hood revealed that actual revenue per branch fell 9% (five new offices were opened in the year) and premises costs rose up to 11%. A substantial narrowing of margin therefore.
Then, in June, Foxtons came clean and issued a ‘significant profit warning’.
This week LSL, owners of Reeds Rains, Your Move and Marsh and Parsons, were next to put their hand up and prophecise that their full year performance would be far worse than previously expected.
Independents too, whilst often better agents and more resilient than the corporates, are feeling the pinch with ‘Apprentice’ Jamie Lester’s Haus Properties reportedly closing half of their offices with immediate effect.
This is not an article about what the traditionalists can or should do about the changing shape of estate agency. It’s probably too late for that now. But it is my flag in the sand that the signs are evident that the shifting estate agency landscape is starting to eat those that have ignored the inevitability of a consumer motivated model winning ground.
The fact is that whether it be a slowdown in Prime Central London, ‘Brexcuses’, the rise of the digital disruptor or whatever, we are now witnessing the ultimate consolidation of the estate agent. It’s happening even if the industry may choose not to acknowledge it publicly from their Eames inspired designer shop fronts.
No, not the death, I’m still not saying that. But like an overweight diabetic with a 40 a day smoking habit, things don’t look so good for those that seem intent on confining themselves to their favourite old armchair.