Is estate agency the next business to quit the high street?

David Alexander on the closure of property shops

Estate agents are likely to be the next victims of the latest string of high street closures as demand moves online with almost 2,500 UK estate agency businesses going bust in the last five years.

There were 2,181 estate agency failures in England and Wales and 265 in Scotland 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, high rents, and for retailers and estate agents alike, greater online competition.

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 too.

For most people under 40, the idea of wandering from shop to shop in city centres is alien as they conduct their purchases on phones, tablets or computers.

Rents and business rates have also played their part, which is why this downturn is also affecting casual dining.

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.

The professional, largescale investor will remain, but we will see a thinning out of smaller “amateur” landlords as letting becomes costlier and more complex.

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.

The market remains buoyant for those companies offering clients an up-to-date online service catering for all needs from initial advice, consulting, managing, advertising, and promoting, alongside key legal and financial services.

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.

There are likely to be more closures along the way as the market adjusts.