Prediction is made by industry business acquisitions expert Adam Walker, who says he has seen huge surge during Covid.
Lettings agency business acquisitions expert Adam Walker has predicted that the sector will eventually go the way of supermarkets during the 1970s and consolidate into a handful of major players.
Speaking with The Negotiator for a feature in the April issue of our magazine, Walker said the current wave of mergers and acquisitions seen within the industry in recent months was just Covid helping to accelerate an existing trend.
“It will take another ten years but I can see the lettings industry consolidating into approximately 20 large lettings agency players who will snap up 90% of the market, leaving the remainder to smaller players,” he says.
Walker, like many other industry commentators recently, says factors include the extra costs of compliance with a growing number of laws and regulations, the tenant fees ban, lower transaction levels during Covid, fierce competition, the evictions ban and the long hours required to manage a portfolio.
He says profit margins are being squeezed regardless of whether an agency is large or small, but that agents who can hoover up competitors and build their portfolios significantly are able to make higher margins than smaller agents with more modest ones – and this is helping drive the surge in business acquisitions and sales.
“Another part of the picture is that lettings agencies are much more difficult to set up than sales agencies,” says Walker.
“This deters new entrants – while letting agencies can take a long time to establish, someone setting up a sales agency can be up and running and into profitability in a relatively short period.”