Property investor

 

Estate agencies which survive the recession will be leaner and more focussed, writes JACK FAGAN

FEW businesses have escaped the effects of the financial crisis and the global economic storm. The ground already lost in this recession will take years to reclaim, but for the real estate industry, the odds are that it will remain a fraction of its original size for the foreseeable future.

There have already been widespread job cuts in most high street estate agencies. The level of closures has been highest in provincial towns where there is nothing like a sufficient level of rental business to offset the effects of the collapse in house sales.

Many of these offices had been opened over the past decade by independent operators to cash in on the housing boom but were far from qualified to cope when times got tough.

Longer established country agents have also closed a number of offices and are operating other branches on restricted hours but, according to Fintan McNamara of the Institute of Professional Auctioneers Valuers (IPAV), their members have been able to weather the storm better than most because of their ancillary business interests – many are funeral directors, insurance agents, publicans and part-time farmers. IPAV estimates it has lost 7 to 8 per cent of its members.

While many agents employed on new and second-hand residential sales were the first to lose their jobs, commercial property consultancies have also been reeling since the downturn.

For agents specialising in land sales who had been run off their feet in recent years, the only real prospect of work now resides with the banks and Nama, as they look for realistic valuations on development sites which have been decimated by the market collapse. Worse still, the fees this time around are nothing like in the good old days and are being determined by the level of competition from rival agents pitching for the same work.

Senior management in large commercial property agencies are determined to keep the show on the road even if fees are drying up in many areas. Those with contracts to manage shopping centres and office developments are best equipped to deal with cash flow problems. A handful of retail agents have been bucking the trend by rolling over vacant shops, even if they sometimes have to settle for lower rents.

Jobs have already been lost in commercial property teams at the banks, who are not lending, and among investors. Investment agents have also been feeling the pinch as investors turn up their noses at high street properties they would have killed for a few years ago.

Few private clients concede that they cannot get the loans they need and for the first time in decades, the investment agents have turned their attention to UK and German businessmen who know that Dublin is good value once again and have no trouble in finding the money.

Office letting agents who were among the biggest fee earners in recent years are also finding the going tough. Rents have tumbled and with a massive oversupply of both new and second-hand office space in the city there could be a few difficult years ahead.

By the time the property market finally bottoms out – and that cant be too far away – the estate agency business will be a leaner and more focussed business with fewer back-up staff. It will not be the only service to dwindle in size. Job losses could be even greater for quantity surveyors and chartered surveyors, not to mention architectural firms which reported that up to 40 per cent of staff had been laid off as early as last March.

Thankfully, many of these redundant architects have either set up their own businesses since then or relocated to other parts of the world, notably the Middle East, Scandinavia and the UK.