Home » Features » Big fish, little fish…
Regulation & Law

Big fish, little fish…

Nigel Lewis articulates a growing trend we’re witnessing in our industry – the growth of large groups by acquisition.

Nigel Lewis

Big Fish Little Fish image

It is time to consider the C-word. Consolidation. At no time within the history of the property industry has there been such a flurry of big corporate agencies hoovering up smaller rivals. All in a bid to grab market share within a market where fees are shrinking, and competition is getting hotter. And particularly so in the lettings market.

The Government is ‘helping’ here too with greater regulation. Lettings is becoming increasingly bound up in red tape…

Link to Comment - Nigel Lewis

Nigel Lewis

As well as the big corporates like Belvoir, Leaders Romans Group, Dexters and The Property Franchise Group increasing their acquisition activity, Foxtons recently bought rival Douglas & Gordon. Plus, there has been a flurry of smaller one and two-branch agencies being sold to larger rivals all over the UK. This recently prompted industry expert Adam Walker to tell The Neg that he expected the industry to consolidate into a handful of big players within a decade or so. And let’s not forget the energetic buying spree of the Lomond Group, which right up until the end of last year was buying both small and large agencies at pace with a clear ambition to be the next big corporate.

It’s happened before

The property industry is a unique one, in the proper sense of the word. I was talking to a food journalist friend recently about how many sectors including hers have been consolidating. She was remembering the 1970s when the UK was dominated by independent local shops in much the same way our industry is at the moment.

The food market was disrupted by large companies like Tesco and ASDA selling everything as cheaply as possible while offering better convenience, ranges of food, standardisation and more locations than their smaller rivals.

It is clear that the property industry is going the same way. As consumers, egged on by low-cost moving outfits like Purplebricks and Yopa, now expect agents to do more for less, so consolidation will be inevitable as ‘scale’ and its subsequent cost-savings become the only way to be viable. And the purchase of Countrywide last year by Connells is just one sign of this.

I am aware that many agents will be reading this piece and be disagreeing. They will say unlike a food shop the success of an estate agency is down to the quality of its people because the industry is a ‘face to face’ business, not a face-less supermarket shed. But I suspect that, in the long term, technology will soon change all that and the day will come when the first home will be sold entirely via a smartphone app from listing to completion.

Thousands of flats are already rented out this way every day in the UK – via Airbnb – without any human interaction, and if the plethora of tech firm press releases The Neg receives is anything to go by, much of the lettings process in the traditional market is going that way too. And the big money is betting on more consolidation too – the venture capitalists backing the Lomond Group believe that the time has come to hoover up rivals.

And it’s easy to see why – many lettings agency owners are coming up to retirement age and have assets to sell that they can turn into pension funds, so companies like Lomond Capital who approach them through brokers such as Adam J Walker usually cast their offers onto fertile ground.

Red tape and regulation

The Government is ‘helping’ here too with greater regulation – new legislation in recent years such as the Tenant Fees Act, deposit reform and the need to interact with the often labour-intensive redress process, mean running a small lettings agency is becoming increasingly bound up in red tape – an ironic development given the Tories like to cast themselves as the champions of deregulation.

But the PRS needs to consolidate anyway – private landlords already have stiff local competition from the build-to-rent sector in many city centres and therefore the service offered to tenants will have to be improved, a trend that will spread into outer suburban areas and towns during the next decade.

Also, build-to-rent operators aren’t interested in small lettings agencies. If they’ve got ten blocks across a city they want a firm with operational reach across all the sites to rent and manage their properties, rather than having to deal with local one-branch firms. It’s why big agencies like Savills and KFH in London are rapidly building up big BTR departments.

And it’s why, for the reasons set out above, consolidation is going to be a significant talking point for agents this year.

February 8, 2022

What's your opinion?

Please note: This is a site for professional discussion. Comments will carry your full name and company.

This site uses Akismet to reduce spam. Learn how your comment data is processed.