The Internet has taken the business world by storm and despite a relatively slow start this is starting to have a major impact upon the property sector. Property agents, so-called “middlemen”, are starting to feel the pinch with many customers taking previous property agent activities in-house. There is no doubt it is the Internet which has allowed landlords and property development companies to directly reach out to potential customers thereby saving themselves the payment of significant commissions. What can property agents do to survive?
Critics of the property agent sector would suggest that many earned large commissions for relatively simple tasks such as reaching out to their customer base. This perhaps undersells the role of the property agent in years gone by because it will have taken years and significant investment to build up a customer base. There is no doubt that property agents did offer valuable services before the introduction of the Internet – the chances of customers reaching out directly to specific clients was negligible.
What next for property agents?
More and more property agents are reporting a reduction in turnover in relation to small to medium-size transactions. As we touched on above, office letting companies such as Regus are taking many previous property agent activities in-house in order to save money and take more control.
It is worth noting that a number of property agents are now looking to transform themselves into property management companies. These type of operations offer long-term recurring income and will make use of their experience in the property market. As the commercial and domestic markets continue to grow there will be greater competition in the property management sector but also greater opportunities. For many companies recurring income is the Holy Grail because it is dependable and the previous one-off commission transactions, which could be fairly large, would be a bonus in the future.
Large transactions still offer rich pickings
Interestingly, while the small to medium-sized end of the property agent market is under intense pressure it seems that the larger transactions will still create sizeable commissions. It is these markets, where there are multi-million and potentially multi-billion pound transactions involved, which will require careful handling and experience. Many of the companies looking to rent out enormous property portfolios will neither have the experience nor the time to contemplate taking on the role of property agent as well.
You would normally expect these larger transactions to come under pressure at some point, in relation to large commission payments, but the balance of risk/reward would seem to protect the role of property agents at the moment. In the midst of this confusion it is sometimes easy to forget property agents do play a role, they have played a role and they will be involved in the future. To what extent and what kind of services they offer, only time will tell.
The Internet has changed the way we think about many areas of traditional business and property agents are not immune from this change. The multi-million dollar commission cheques of years gone by are seriously under threat and many property agents are now looking to increase their recurring income. This has seen large numbers switching to property management activities which offer the certainty of recurring income going forward. In many ways the million-dollar commissions of years gone by might be seen as a bonus in years to come.