Knight Frank is about to open its 20th office in London.
But the news has prompted one marketing expert to say that this seemingly ordinary act “is a tipping point, a sign of an accident waiting to happen [to estate agents]”.
Writing in marketing magazine The Drum (not to be confused with the property magazine), business books author Hamish Pringle says: “There are already ten estate agents in this 200 metre road and a further nine within five minutes’ walk, let alone drive.
“Estate agents we’re not short of. So why is another one opening when the sector is over-shopped and ripe for the disruptive impact of online-only estate agencies?”
He goes on to claim that there are “all the makings of a downward spiral, which may render estate agent shops unviable, despite their current profitability”.
You will disagree with many, perhaps even most, of Pringle’s points.
And indeed, you can see from today’s Countrywide story that it is entirely possible to operate a high street brand that is both highly profitable and confident about expansion – and which has yet to produce an online model.
However, some of Pringle’s criticisms can be taken in the context of what is undoubtedly one of today’s most important industry’s debates – the topic of change.
Comments (9)
Oh no, we're just opening our 4th Estate Agents office in Witham, Essex… Better send back all those shiny new displays, furniture and modern IT equipment!!
Wish you well with your new office, I see from Rightmove, that including yourselves, there are 11 agents listed in Witham, and the internet tells me the population of the town is 22,500, where I am, the population is only around 10,000 more, and there were already twice as many agents, and now the 8 new ones I mentioned earlier, perhaps you can see why I'm thinking that's overkill, and they will not all be able to build a sustainable business.
Ask Foxtons.
If there are "more aspirations to rented than home ownership" then the Buy to Let market will thrive, either way agents will still be required….
Not if your buy to let investors are looking at the long term Katie, as many of them would. There won't be the 'churn' of property!
Interesting article, where I am, there are 8 new offices opened (a mix of branch offices and new startups) since the start of the year. I'm sure this is not something unique to our area.
I realise that agents are a supremely confident breed of people, and we all think that we can do better than the chap next door, but there does perhaps need to be a reality check, there are already 22 established agents in the town, all chasing every instruction, and the fact that they are in short supply is well documented.
One swallow, as they say, the fact that we have a booming market at the moment is obviously encouraging new offices, but one has to look at the long term if one is intending to build a sustainable business, and we keep hearing reports that for various reasons, not least affordability, we are on the cusp of a cultural change, with more aspirations to rented than home ownership, if that does prove to be the case, it does not bode well for the longer term.
Hound
You are right re: the longer term. Watch what happens to the High St agent numbers when the market turns, as it will at some point.
I have written much on this topic but we need to differentiate between the perception of 'models'. I believe the day of the High St office has peaked and will regress, but there will remain a few leading names on the High St.
This is NOT to be confused though with a move towards 'on-line' agency. That too will peak.
In the middle, will be agents offering full services but in a much more profitable way than at present – using serviced offices or being 'virtual' businesses but still offering full services agency. The costs will be much reduced – no office, no rent, no business rates, less staff to man/woman offices yet superb full service agency being provided.
This, I believe, is the future.
The future is not on-line agency, it is full service agency delivered in a manner that much reduced costs. It makes the business profitable for ALL in a recession, as typically 2 x sales per month is the break-even point (circa £5k pcm).
Such businesses will typically generate a gross turnover of £120k pa, giving a £60k profit.
No…. especially where I have offices.