EYE contributor, Russell Quirk, asks the question – how do the economics of a branch office really stack up? We hope that EYE readers will help to provide some answers. As Russell suggests – please play the ball, not the man, if you are commenting on this piece. We really don’t want to have to take down comments.
Depending on which data-source you choose to believe there are between 15,000 and 20,000 high street estate agency branches in the UK and it was only the financial crisis of 2008 that ever really saw any significant industry blood on the streets with 25% or so closing, according to analysis by Ordnance Survey. Since then though, there’s been a steady climb back to ‘normality’ levels and the likes of Hoe Street, Walthamstow, the mecca of our industry with over 20 agencies crammed within 300 metres of each other, continue to epitomise public belief that our town centres are ‘full of ****** estate agents’.
Some idiot, me I think, once said that most high street estate agency offices would eventually close. This was the consequence of applying commercial logic to a sector bound to follow in the footsteps of others which had all ultimately consolidated from bricks to clicks. Yet some years later modern town centres remain propped up by Costa, Starbucks, Oxfam, an occasional bank, the inexplicable resilience of the Edinburgh Woollen Mill and, yes, loads of estate agencies super-glued in situ.
What is it about our industry in particular that facilitates this Teflon coating? How do the economics of a branch office really stack up?
Well, let’s delve – because I think this is one of the most important unanswered questions for our industry to solve.
High Street Offices – Expensive and Pointless?
It’s impossible to put an exact number on what a high street agency office costs to run each month because there are so many variables depending upon location etc. Mount Street, Mayfair? You can expect rent and rates of about £30,000 per month. Uttoxeter town centre – around £2,000. Much the same differential applies to people costs too. So, let’s just take a sensible midrange number for the purposes of some fag-packet maths and plump for a typical rent and rates cost of £3000 per month and an average staff expenditure of £2500 per month per person at, say, two people per branch in addition to you. Some will of course argue that their particular town/city/village is different to this – but they’d be overlooking what the term average means.
Anyhow, I think it’s pretty reasonable to say that an estate agency office on Average Street consumes about £8,000 per month in rent and rates and staff – plus you. Then add in utilities, portal subscriptions, insurances and the like and it’s more like £10,000 and then you’ve got maintenance, fixtures, refurbs and miscellaneous stuff at, say, £1000 – call it £11,000 all told.
The question is therefore, does your business achieve £132,000 more in fees than it otherwise would each year by operating from a high street branch? At this point I’d be genuinely fascinated to know how many of you think ‘yes’ and how many say ‘no’?
How many sellers actually visit your office to book a valuation? How many buyers come in to see you to talk about what they want to buy? How many applicants, sat in front of you in your expensive shop, do you convert from applicant to a valuation as a potential seller?
I’d wager that the answer to these questions is ‘not many’. And so why on earth do you have an office at all?
High Street Office Costs. Perhaps Justified?
Hold your horses. Obviously it’s not quite this simple because most of us would agree that you need somewhere to sit. And even if you’d need fewer people in perhaps a first-floor serviced office to cope with lower numbers of walk-ins, you’d still need some staff. But in reality you are probably paying double what you otherwise would by being in the high street – but then that’s only £5,500 a month more based on the numbers above. Hmmm, there are indeed many competing considerations to contemplate…
To me, the burning question is this though: How many homes do you list, sell and complete upon purely because your high street office was noticed by those selling clients? How much of its existence is as an ‘advertising hoarding’ and not just as four walls and a ceiling? And how many vendors sign up with you not just because they see your shop sign every day as they drive past but because they value the security of knowing that you are visible? In other words, is an office front not only an important advert in itself but also a conversion tool based upon it demonstrating reassurance, trust and accountability? If your response is a resounding ‘yes’ then I guess that it does have additional value over and above pure shelter.
But, let me ask you to ponder this too… What if you were able to build awareness of your brand together with total trust and credibility without that expensive office commitment? I wonder if that right there is the future of UK estate agency, the best of both worlds in the form of maximum revenue yet minimal overheads?
Can that utopia actually be achieved? Well, more and more independently minded agents would say ‘yes’ to that these days.
I don’t hold my usual cast iron, somewhat controversial, one-sided opinion here. I’m not forcing a view that your ‘enviable high street position’ is futile and that you should burn it to the ground and move to an industrial estate five miles out of town. Because I genuinely continue to ponder the positives of high street offices.
I really am 50/50 on the subject and think that the answer to the question ‘Are high street offices justified?’ is, I’m afraid, ‘It all depends’.
So, novel as it may be, perhaps resist the usual temptation to play the man not the ball as generally happens when I pen these thought inspiring missives of genius – and instead, sensibly comment below on the pros and cons and see what constructive gems shake out.
Russell Quirk is co-founder of PropergandaPR and Investor Director at Keller Williams Essex.
What a poorly written and argued piece.
It’s not do you need a premises to trade from.
The real question Quirk is asking is do you want to be a business owner or self-employed agent.
The bedroom agents working for KW or EXP etc do not own a business … they have merely given themselves a job.
If you have an office (staff) you can grow a business, many agents that have an office are still just self-employed rather than a business owner but that’s an argument for another day.
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He would have made significantly more money running an EA from a high street office, or several offices, than he did in his previous venture.
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Smile Please:
Sorry, but I disagree with your comment that eXp members do not own a business – they are merely giving themselves a job.
It is down to profit after costs, including paying oneself a salary, then a dividend, the payment of VAT and also Corporation Tax. That is a business and many now are in Year 2 and about to ‘cap’ at 6 months into Yr 2, having taken £80,000 in gross commission, paying eXp £24,000 and then 100% of remaining yearly income comes to them, less £250 per completion. It is highly profitable after 6 months and it 100% is a business.
Secondly, some are now reaching the point of moving into offices – one lady doing so this weekend, and recruiting her additional staff – she is not alone, nor will she be alone moving forward – the model allows for this growth, if people so desire.
In answering Russell’s question, when I had my own High Street Branches between 2004 and 2012 (one sales and one lettings), the monthly break-even figure was £16,500. When I was the BM of a flagship branch for a market leader in Canterbury, the monthly break-even figure was £43,500, and we still made £118,000 profit per annum.
Our figures showed 10% of our income came as a direct result of having a High Street Branch, and that was for a business with 120 branches.
Does the High Street Branch help generate more business – yes.
Does it show commitment to the local community – yes.
Are they essential – since Covid – no.
The fixed costs are the killer, as when the market changes, as it did in 2008 to 2010, the tied-in nature and regular fixed costs are what does the damage.
More and more will move out of High Street locations, into hubs, and many more of the top performers will work for themselves out of their bedrooms, then their sheds, then their summer houses, then perhaps a serviced office – I myself work out of the Regus Business Centre in Ashford, another FREE perk of being in eXp as it is part of membership.
Those that remain in the High Street will do well, as there will be less competition and some sellers will still want to see their estate agent on the High Street.
What Covid has shown, and now embedded in peoples’ mindset, is that the place WHERE people work is far less important than HOW they work and the service that is offered.
And for me, it will be a blended approach moving forward – all of the above will remain, and people will have a great choice moving forward.
It will all come down to customer service, TRUST and referrals and recommendations to win repeat customers, not one-time hits as many agencies unfortunately only ever experience, as the service they deliver is consistently poor.
Just my thoughts, but important that the correct information regarding other models is out there.
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good comment
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We all have our opinions.
It is strange that EXP etc agents say they don’t need an office and all of a sudden the unicorns that do make a few quid go and open one, its like they are changing the narrative to suit them.
As for the exp, kw franchises. I doubt many that leave the companies will be able to sell their ‘businesses’
There are also an awful lot of high street owners that do not have a business they have only given themselves a job. If you cant walk away from the ‘business’ for a prolonged period you are self employed. If the office down the road is run by Mr Smith and he takes 3/6/12 months off and the business goes to pot …. Its not a business … All he has done is given himself a job.
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…oh dear…
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Most of us would also not call it a business with 4 properties for sale … More a hobby.
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I’m really sorry Russell but this article is a load of nonsense, you cannot throw in the cost of 2 staff to work out the monthly cost of having a high street office.
The cost for having a high street office is purely the rent, rates, utilities and insurance.
The benefit of having a high street office is a massive billboard for your business, a place for your team to work from and loads of added confidence for vendors or landlords to be able to come and see you there if they’d prefer that option.
I’m definitely playing the ball not the man here but feel that PIE would be better for not being a non-stop propaganda machine for some contributors .
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But perhaps there is an argument for smaller offices?
I love Mr Quirks pieces BTW – he has the balls to challenge the arrogance of the industry whether or not you like it is up to you. There is enough cancel culture without needing any more!
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I think that it really does depend on where you are in addition to the other ponderables and also whether you want to scale up.
If you own the office then it probably makes sense to keep it whereas if you rent it then maybe moving to a business centre nearby could work.
if you are starting up then you probably won’t need a high street office as you can build from scratch.
A question you may want to ask is whether or not a high street office would make sense for the KW type operation? Should the hub (market centre) be on the high street?
Finally, it’s all about scale. If you want to make more money I.e profit, then perhaps a sole operator with a credible address like an established business centre could offer the right balance? Bigger is not always better.
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People who can’t afford a High Street office almost convince themselves that it’s not needed and everything is online etc etc.
Is you want to Cover all basis and create a proper office environment and have credibility – you need an office. THE END.
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Hit the nail on the head. If you are good enough and want to be your own boss, work form home, earn £100k plus pa, you can as I have proven since 2005! High Street agents cant compete as they have the overheads, I am not saying High Street agents give a lesser service, but the same buyer buys thru me and the vendor pays half the fee. Its a win/win and I called it in 2005 much to the amusement of the High Street agents.
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Other than rent and possibly business rates, what ongoing overheads does a high street agent have that you don’t ?
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Errr….staff…..
Also if said High Street agency has back seat Directors who want their £100k for doing not a lot…
Is that an ok answer for you?..lol
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Staff are needed because the business levels dictate it, staff numbers can fall as business levels do. If i had the same business levels I do currently and worked from a non high street location I would need the same number of staff.
I dont believe the average high st agent has back seat Directors who want £100k, corporates yes but thats not really who the article was talking about.
Let me rephrase the question. I have one office, rent about £1k a month, exempt from business rates. What running costs would I save by taking my business of the high st ?
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As above staff…how many staff do you have… How much does it cost you to run your business?
It costs me £2k pcm to run my business.
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Plus the most important thing for me is lifestyle…with an office you are tied..whereas my office is in the garden in the summer
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So its not about saving overheads as you first stated its about not being tied to the office. You are only tied to the office if you work on your own, cant imagine there are many High St offices with just the owner working there.
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The whole point is High Street agents say you cant have a successful online agent working from home…
I am the point incase that you can, as I don’t have the overheads and I have a better lifestyle, the client also saves thousands of pounds in fees for the same buyer….so its a win/win/win…
Why cant you get that….
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I don’t think they are really saying that all .However there is always the opportunity of somebody popping their head through the door in the High Street charmed by front of the house and an instruction won
Certainly an agent friend of mine who got chatting to someone just browsing the properties on a board not even looking to sell or buy just sheltering from the rain.
Happened to own won a small plot of land used as a rough orchard.He said can I take a look at it. He said sure. Ended up as a key plot in a major site assembly Not only did the agent trouser a profit orientated fee but ending up picking the sale fees by the housebuilder for 4 phases of development over the next 7 years
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As I’ve said coming of the High St wont save any money in staff, any actual examples of where I would save money ?
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The example is it costs me £2k to run a successful online agency how much does it cost you to run your high street office?…
or have you gone all shy?
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About £8k a month but as you dont know how thats broken down its a moot point. I will ask again, other than rent, what would I not be spending money on that I currently do if I came of the High St ?
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£72kpa more than I spend for the same buyers….If you still don’t get I can’t help you.
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So you still cant give an example of a saving from being off High St rather than on it ?
You dont know anything about my business or turnover so for all you know you are comparing apples and pears. I am guessing/hoping your £2k a month doesnt include what you take whereas mine does so again no comparison.
Its great your model works for you, I have never said you can thave a succesful online agent working from home but you are saying you save tens of thousands but cant point to where those savings are.
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Think I have mentioned staff three times now…
Your business costs £72k pa more than mine….and the important thing for you to understand….the buyers are exactly the same…whether it’s your business or mine.
If you were to say fair play Rich you have great business model that’s work, but I prefer a high street office that’s fair enough but don’t say online agents don’t work! When I have £60k profit in last 12 weeks we working from my study.
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What happens when you’re ill/incapacitated and I don’t mean a couple of days due to a tummy bug? What’s your back-up plan?
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High Street premises are always far more expensive than am office in a block. As a developer I have dealt wit a number of excellent agents who do not have a high street office. When I am instructing an agent I do n to care where they are based
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I have replied about three times now saying coming off the high street wouldn’t mean less staff.
I literally said “its great your model works for you”
I haven’t said online agents don’t work.
Might be worth reading the points you are responding to rather than the ones that you appear to have made up,
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If your going to ask readers to play the ball not the man either give the full context to the recent career or don’t advertise his current businesses.
The article is so full of inaccuracies I don’t even know where to begin. The assumption that you have staff in a high street office but don’t in a separate office tells you all you need to know about the type of agency he is aligned with.
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I don’t understand why this is a binary right or wrong conversation . Work from home works and will continue to work for some, high street is tired and tested and will continue to work for many , non high street offices do and will continue to work as well . on the flip side all these models are often failing and will fail for others in the future. the key is what type of opportunity do you actually want . if you want a Buisness you can scale own and exit your approach would be different than if you want an income and have some element of control but an exit down the road isn’t a priority. however potentially the most potent offering would be high street brands with self employed defined territories expanding its footprint and providing real support and lead Generation to its self employed network. The high street or office based agents would have a distinct advantage of allowing all types to be attracted to working directly for or with them.
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OK Russell, I’ll play ball ….
“The question is therefore, does your business achieve £132,000 more in fees than it otherwise would each year by operating from a high street branch?”
The fact that you have included portal costs/utilities/staff costs to arrive at the above rather dilutes your argument .
Finally, a sliding tackle…..
I feel we should all give thanks to PIE for finally engaging a Sub-Editor to remove some of the verbal diarrhea that was a feature of Mr.Quirk’s previous opinion pieces – I can actually read them now 🙂
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The article is total garbage and doesn’t look at why any business needs premises on the high street and seems focused on the biggest mistake, arguing over cost is all that matters.
Simply, do you need a high street business for your “market”, the cost is a by-product.
On-line has proven that it does not work with only 5% of the market after 10 years of trying and super meggar £m’s spent and lost. The on-line model hasn’t created more revenue, as to compete as they reduced their income to a pittance and have to attract 3 or 4 fold more business or put another way, worker harder for less (they were hoping not to work hard) because they think that they can save on high street premises prices.
High Street Office costs and the amount per month is what? For many not that many an extra sales per month. The market (consumer) is prepared to pay that cost because of the service it provides and why they have stuck with you.
The worst salesman and always failed in the world, is the one who sells their service on cost.
We are not like the high street retail shops that have been hit by on-liner shops. Their products are extremely low profit per item requiring thousands upon thousands to cover overheads.
Close your door and the public will go (do) to the agent who is open. We are not high street retail.
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Not true I have been online since 2005!…in the last 3 months I have sales profit of £60k….that works for me…
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So to those who put the thumbs down, would you not like to work from home and earn £60k in 12 weeks???….doing the job you love….
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Its odd as the figures you are suggest dont seem to tie up with an endole report.
In fact your NET assets dropped by 20k in the last reported year.
Bit of bravado here or being economical with the truth with the tax man?
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Good job your not an accountant hey big boy…
And the figures where from 1st jan this year to date sales profit, so wind your neck in.
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I and just about every agent is on-line. We shall wait and see your disclose at Companies House in April considering that more you claim than you have produced in a year and over recent years and we have all been in a pandemic. I see your own website stock is 59 properties. Shall be interesting to see how you maintain and make £240K net at that level.
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Last year was the best year I have had…If I make £240k net that will be amazing!…cant see that thou….sure you’re keeping your fingers crossed for me…lol
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Years ago, about 4 BC, I said here that I just could not understand why agents continued to have this desire for a high street presence. Why spend the money?
I am not an estate agent, but I’ve very often used them and although many years BC and also before online I would certainly visit agents’ high street offices. Now I wouldn’t dream of it – I’d do what almost everyone else does these days and look online.
There is a road in Maidenhead called Queen Street and it’s full of agents’ offices and while staff continue to stare at screens and talk on the phone, tumbleweed is blowing down the street. And even Before Covid is was very quiet. Why not just rent far cheaper smart offices in office blocks for when you need to meet clients?
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And that is why you do not know or understand estate agency ‘business‘and on-line has never got any real traction. Those that have failed look at it from pounds and pence business. No its isn’t.
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From October 2019 – an article in The Negotiator by Russell Quirk –
Former Emoov boss and now PR guru Russell Quirk has claimed that estate agents in the UK should thank him and the other pioneers of the online and hybrid model for their lack of success online.
The comments, which Quirk admits are controversial, were made yesterday during a podcast with Mark Worrall, founder of agency Love2Move and Sam Hunter, founder of property data firm Homesearch.
Russell Quirk says the past fifteen years of online estate agency development that has seen millions of pounds of investor cash burned was ‘an experiment’ that he and other pioneers such as Mark Readings and Graham Lock of HouseNetwork and Adam Day of Hatched now put down to experience.
“Estate agents all over the UK owe us all a big debt because we’ve shown that the online model doesn’t work and therefore that it’s not a threat,” he says.
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Purple bricks agents need a car boot!
A successful agent can afford high street premises and, well utilised, it’s a fantastic advertising medium as long as it’s not just full of particulars!!
Also it’s somewhere to go to work which is kind of useful for any medium sized plus business!
Prime sites away from town centres are great as it can overcome car parking issues but I think still you need to be visible as a brand!
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Bricks need to be more worried about IR35
Massive lawsuits coming i feel.
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I love this, my dad’s bigger than your dad rubbish, lucky no one takes this seriously
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