Fee-cutting is threatening to damage the property professions’ reputation, claims Richard Lay, chairman of DTZ Debenham Thorpe. And, he warns if it continues the quality of service will start to suffer, writes Karen Lennox.
Announcing an 11.4% fall in DTZ’s pretax profits to £3.65m in the year to April, Lay attributed the decline to the quiet commercial property market, combined with little recovery in the demand for space.
While Lay says his firm is not prepared to take on work for fees which provide an unprofitable return, he says fee levels remain under pressure. “The danger to the profession is that less experienced staff will be used to do the work, and the level of service will inevitably start to slip,” he warned.
“Some firms still seem to be buying work. Unless we can do something to stop the current fee cutting, it is inevitable that we will see a decline in service.”
Despite the tough market, DTZ’s turnover inched ahead to £58.19m (£57.57m), with the professional divisions showing a marginal improvement compared to the agency side of the business. “Most in the profession would agree that the property market remains subdued,” said Lay, although he has hopes for a revival in development activity in the coming year, and is holding the final dividend at 2p per share, giving an annual payout of 3.5p.
Fellow quoted agent Fletcher King also had a tough time in the year to the end of April. The firm slipped into losses with the bottomline £1.03m in the red at the pretax level, from a £301,000 profit last time. Turnover was down to £4m (£4.9m) and costs are being cut to improve performance next time. Staff levels are being maintained, says chairman David Fletcher, but salary packages have been renegotiated: the highest paid directors have had basic salaries cut and performance-related bonuses introduced.
And, while fee cutting is still a problem, Fletcher notes that some clients are starting to wise up to the fact that you get what you pay for. “We are finding a perceptive change in attitudes: clients realise the cheapest price is not necessarily the best.”
“We continue to gain instructions, on sensible fee agreements, where profit can be made,” he says. “We are refusing to pitch for business where we know that price, rather than quality of service, is the main criteria to be applied in awarding the job.”
