Redundancies, agency consolidation and a retail shakeout are fast emerging as the defining themes of 2012.
So far, so familiar. Most commentators – this one included – made similar predictions 12 months ago. What’s different this time is that, just a week into the new year, these aren’t mere predictions. Structural change has already begun.
BNP Paribas Real Estate announced between Christmas and new year that it would cut 10% of its workforce, entering into consultation with 70 staff.
This week, it revealed it would be shutting offices in both Cardiff and Manchester (p30) where, according to EGi’s latest agents league tables, it fails to make the top 10 in either city.
Savills confirmed on Thursday its £4m acquisition of niche central London agency Gresham Down Capital Partners.
It will come as little surprise to hear the likes of Knight Frank’s Alistair Elliott say this week that consolidation will be the single most significant news story of 2012. Again, he won’t be alone in blaming oversupply in a weakened market.
BNP PRE’s won’t be the last redundancies of this year. Jones Lang LaSalle and Knight Frank have both shed staff in recent weeks. More agents will be doing it below the radar; still others will be forced to show their hands in the weeks ahead.
Similarly, Savills’ swoop won’t be the last of its kind, though the number of niche agencies that are both attractive to bigger players and receptive to their advances is shrinking all the time.
That fact, however, will only persuade some of the bigger firms in these troubled times to seek comfort in each other’s arms.
And then there are property newcomers who continue to see the sector as an attractive bet.
Capita, Deloitte and UGL have led the most recent wave; who will ride the next? (Indeed, there may be appetite for further plays among this cadre, with UGL the most likely mover.)
And then there is retail. In a trading statement this week, Clinton Cards said that, despite improved trading, it was continuing to examine its 740-strong store portfolio.
D2 Jeans collapsed into administration in the dying days of 2011, and Past Times and La Senza could follow suit. And with results from Next, a reliable bellweather, disappointing, others will follow, among them some of the best-known names on the high street.
The scale of change likely to play out was highlighted by JLL this week. Up to 25% of existing high street and shopping centre leases are due to expire by 2013 and a whopping 50% by 2015, says the agent.
Yes, some are held by retailers in rude health, operating out of prime locations. Many, however, are not.
Whether the fallout goes as far as JLL’s earlier prediction – that as much as 30% of UK shopping space could be obsolete by 2020 – is almost moot. Whether it is 20%, 25% or 30%, the coming years will see a decisive, widespread and irreversible shakeout of retail real estate.
That’s not to say these will be the only themes of 2012 (p38). A fingers-crossed attitude – something this industry excels at – prevails. Will the second half of 2012 deliver the uplift that JLL predicts? Let’s hope so.
If it does, it will be in no small part down to the Olympics, which will need to provide more fillip than disruption.
Fate also rests in the hands of the banks. They will continue to wield considerable influence both in the actions they take and the decisions they duck. And international investors will play their part too, though there is no reason to suppose that the glut of overseas investment that flooded London right up until Christmas will slow.
It’s going to be another roller-coaster year.
