Estate agencies likely to be the next victim of High street closures

Estate agents are likely to be the next victims of the latest string of High Street closures as demand moves online, according to an Edinburgh-based property management firm.

DJ Alexander Ltd, one of the UK’s largest family-run property management businesses, has analysed official data and found that almost 2,500 (2,446) estate agency businesses have gone bust in the last five years.

There were 2,181 estate agency failures in England and Wales and 265 in Scotland in the five years since 2013 with the expectation that this trend will continue as the sector suffers from the same High street issues as retailers, casual dining outlets, and others with bricks and mortar exposure. Over the last 18 months these businesses have all succumbed to a combination of high business rates, large rents, and for retailers and estate agents, greater online competition.

David Alexander, managing director of DJ Alexander Ltd, said: “There are a number of factors in play causing this large number of business failures in the letting and estate agent sector. Clearly online competition has had a dramatic impact on the High Street with its lower cost base and its generational and cultural shift from on street to online shopping. The internet has undercut much of the High Street in the retail and other sectors over the last five years and this is likely to continue.”

“The generational and cultural change is enormous. For most people under 40 the idea of wandering from shop to shop in city centres’ is alien to them and they conduct many of their purchases on their phones, tablets, or computers. This situation is only likely to continue, and we can see that High Street outlets such as estate agents are suffering as a result and will continue to suffer over the next few years. Rents and business rates have also played their part, which is why this downturn is also affecting casual dining, so it is a combination of issues which is causing so many business closures.”

“However, there is a further issue for letting agents which is that the property investment market has been hit by a number of additional charges and loss of reliefs which again is likely to impact on the number of rentals and sales conducted by estate agents occurring in the coming year. With the buy-to-let market facing a steep rise in operating costs, tax reliefs, and borrowing charges and increased regulation it is likely that this market will remain subdued for some time to come. The professional, large scale investor will remain, but we will see a thinning out of smaller ‘amateur’ landlords as letting becomes costlier and more complex.”

Mr Alexander added: “Equally, we have seen many of the traditional estate agents fail to adapt to the changing marketplace relying instead on client drop-ins to their offices for much of their business. However, the market has evolved, with more clients and investors looking online seeking a one stop shop for their legal and financial advice along with property management as well as marketing and selling.

“The loss of the High Street estate agent does not mean less service, in fact it means more, with a greater focus on the needs of the client. The online client is simply using a different method of accessing the housing market, but their demands remain as high, if not higher, than before. But the market remains buoyant for those offering clients an up to date online service fully catering for all their needs from initial advice, consulting, managing, advertising, and promoting with their key legal and financial needs met. It is a brave new world but one in which estate agency will continue to exist but not in the way it has in the past and these failures are a sign that there will be closures along the way as the market adjusts.”