Shock sale may signal more agency consolidation

Shock sale may signal more agency consolidation

20 April 2012 by Staff Reporter 0 comments

Simon Parker

Further industry consolidation is likely as agency margins tighten and aggressive groups look to take advantage, a number of industry professionals have said in response to Independent Property Group’s shock purchase of NSW-based group Laing+Simmons.

The purchase, which was announced yesterday, will see the diversified ACT-based Independent Property Group - which has, amongst a number of businesses, seven ACT-based shopfronts and an additional office in Queanbeyan, NSW - purchase Laing+Simmons’ 47 NSW-based offices.

Craig Bright, managing director at ACT-based Total Property Management, and a Real Estate Institute of ACT (REIACT) councilor, said while he wasn’t familiar with the specifics of Independent Property Group’s purchase of Laing+Simmons, the deal appeared to make sense.

Mr Bright told Real Estate Business that Independent Property Group, already a dominant player in the ACT market, a point it emphasised a few years back with its purchase of fellow local agency Peter Blackshaw Real Estate, had little room to grow in the Territory.

“It’s by far the largest group in Canberra,” he said. “It’s a natural progression.”

He said the decision did suggest that industry consolidation was continuing, pointing to a number of boutique agencies that have recently been swallowed up by franchise networks.

“In saying that, there’s still a place for a good boutique agency in the market,” he said.  Moreover, recent moves by Ray White and McGrath Real Estate into the ACT showed some groups were eager to take a slice of the Canberra market.

While Peter Flynn, group franchise manager at Richardson & Wrench, also wouldn’t comment on the Independent Property Group transaction, he noted that with agency margins getting squeezed now was an ideal time for quality people to shine.

“It’s a great time to pick up market share,” he told Real Estate Business.

He said while times were tougher for some agencies, how wasn’t the time for real estate companies to stop spending on revenue-generating activities. “That’s a recipe for contraction,” he said.

Mr Flynn said principals needed to have a detailed understanding of the money coming in and out of their companies, and should continue to spend on those activities that would keep revenue coming in the door.

This included spending on recruitment, he said. “We are 150 per cent up [on-year] in terms of enquiries [for franchises in our network],” he said, attributing this surge of interest in the popularity of R&W’s fixed fee franchise model. In particular, he noted a strong increase in interest from individual sales agents looking to start their own operation.

Sadhana Smiles, CEO at Harcourts NSW, which has 75 offices, said her firm is always on the lookout for strong businesses to purchase. She commented that there are always positives about a purchase of this nature.

“It would certainly provide your franchise group with a good footprint, and strong brand recognition,” she said. "And they’ve got good offices in great locations.”

One thing she did note, however, that with much of the NSW real estate market tracking sideways and properties generally taking longer to sell, some agency cash flows may be being stretched with smaller boutique franchises opting to sell.

Simon Parker

Further industry consolidation is likely as agency margins tighten and aggressive groups look to take advantage, a number of industry professionals have said in response to Independent Property Group’s shock purchase of NSW-based group Laing+Simmons.

The purchase, which was announced yesterday, will see the diversified ACT-based Independent Property Group - which has, amongst a number of businesses, seven ACT-based shopfronts and an additional office in Queanbeyan, NSW - purchase Laing+Simmons’ 47 NSW-based offices.

Craig Bright, managing director at ACT-based Total Property Management, and a Real Estate Institute of ACT (REIACT) councilor, said while he wasn’t familiar with the specifics of Independent Property Group’s purchase of Laing+Simmons, the deal appeared to make sense.

Mr Bright told Real Estate Business that Independent Property Group, already a dominant player in the ACT market, a point it emphasised a few years back with its purchase of fellow local agency Peter Blackshaw Real Estate, had little room to grow in the Territory.

“It’s by far the largest group in Canberra,” he said. “It’s a natural progression.”

He said the decision did suggest that industry consolidation was continuing, pointing to a number of boutique agencies that have recently been swallowed up by franchise networks.

“In saying that, there’s still a place for a good boutique agency in the market,” he said.  Moreover, recent moves by Ray White and McGrath Real Estate into the ACT showed some groups were eager to take a slice of the Canberra market.

While Peter Flynn, group franchise manager at Richardson & Wrench, also wouldn’t comment on the Independent Property Group transaction, he noted that with agency margins getting squeezed now was an ideal time for quality people to shine.

“It’s a great time to pick up market share,” he told Real Estate Business.

He said while times were tougher for some agencies, how wasn’t the time for real estate companies to stop spending on revenue-generating activities. “That’s a recipe for contraction,” he said.

Mr Flynn said principals needed to have a detailed understanding of the money coming in and out of their companies, and should continue to spend on those activities that would keep revenue coming in the door.

This included spending on recruitment, he said. “We are 150 per cent up [on-year] in terms of enquiries [for franchises in our network],” he said, attributing this surge of interest in the popularity of R&W’s fixed fee franchise model. In particular, he noted a strong increase in interest from individual sales agents looking to start their own operation.

Sadhana Smiles, CEO at Harcourts NSW, which has 75 offices, said her firm is always on the lookout for strong businesses to purchase. She commented that there are always positives about a purchase of this nature.

“It would certainly provide your franchise group with a good footprint, and strong brand recognition,” she said. "And they’ve got good offices in great locations.”

One thing she did note, however, that with much of the NSW real estate market tracking sideways and properties generally taking longer to sell, some agency cash flows may be being stretched with smaller boutique franchises opting to sell.

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