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With one in four real estate industry professionals reporting they changed employers in 2023, business leaders are realising they must reconsider their retention strategies.
Macquarie Business Banking’s 2023 Real Estate Benchmarking Report has cited staff retention as a critical issue for the industry in the year ahead, as an outsized proportion of already slim profit margins are currently being devoted to finding and training new staff.
Out of a survey of representatives from 431 residential real estate agencies nationally, 71 per cent of respondents recorded flat or declining net profit margin in the 2023 financial year, driven mostly by economic conditions but also impacted by the growing trend of operating costs outpacing revenue gains.
Restaffing was revealed to be a high cost for agencies, with the report stating that one in four real estate professionals had changed employers in the past year. That figure is even higher in the property management segment, which recorded a staff turnover rate of 35 per cent.
Domonic Thompson, national head of real estate at Macquarie Business Banking, noted that the 2023 financial year was a challenging one for real estate agents, with shrinking profits somewhat understandable in the context of Australian market trends. Even so, he said that profit should remain within relative control through effective cost management and productivity monitoring.
The reasons that agencies cited for shrinking profits were largely factors that could be mitigated with attentive business strategies.
“Price discounting and competition was identified by 43 per cent of respondents as a key challenge, while staff costs (63 per cent) and operating costs (57 per cent) are the key reasons for a decline in profitability during the 2023 financial year,” he noted.
“With one in four people changing roles over the past 12 months, coupled with increased wages and operating costs, the industry is at a critical point where agencies need to address staff challenges by building trust and respect. Getting the people and culture balance can help differentiate an agency, drive better financial outcomes and enhance business value,” Mr Thompson said.
The report stated that in the past year, costs associated with attracting and retaining staff have increased. And with numerous departures, agencies have been consumed by the need to fill vacant roles, train and develop new people, and attend to gaps in the client experience.
This is particularly evident in the property management sector. With businesses looking to use rent rolls to increase earnings in 2024, staff shortages and turnover need to be a priority if they’re hoping to offer the kind of service that will attract new business.
Eight in 10 businesses said that property management will be a focus for business growth and scale in the year ahead.
But as Mr Thompson noted, execution of that plan will depend greatly on the quality of the agency’s offering.
“With 80 per cent of agencies focused on property management growth, the key to success will be to shift away from price driven competition towards offering holistic value, nurturing existing client relationships, as well as future buyers, vendors and property managers,” he said.
Having a business populated by stable and trusted staff will also be key for business leaders looking to put their succession plans in motion, as a high proportion are considering in 2024.
According to the report, 55 per cent of real estate business owners are considering succession or reduction of operational involvement in their agency, having delayed their plans or become more active in their businesses during the peaks and troughs of the past few years.
But before leaders pull the trigger on those plans, Mr Thompson said they will need to spend part of the coming year “improving business performance, supporting staff with strong processes and systems, offering opportunities to develop and grow within the business, and communicating a strong client value proposition”.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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