Strategic changes Stacey Meadwell asks three agents based in Kent how they are changing their working practices to cope with the recession
Agents often remark that the Kent market does “not have peaks and troughs”. It means that boom times are less exciting than elsewhere but downturns are, hopefully, not as painful. But pain there must be in a recession and, in a comparatively small market, how do you keep the fees coming in?
The local player
Karrison
David Robinson works with two others at the Westerham-based firm he set up in 1994. Previously, he worked for a developer/investor. “It was a standing start coming from a property company rather than an advisory practice. I had no clients whatsoever,” he says.
But lessons were learnt from those tough times, andhe has put them to good use during this recession. Reacting quickly to grab opportunities as they appear, and spending sparse marketing budgets wisely are just two examples.
“In a buoyant market, I would bang out a load of marketing brochures to send to occupiers, but there is no point in doing that at the moment. Instead, I target occupiers with a teaser, perhaps telling them we could save them money rather than trying to sell them space,” he says.
The firm diversified from pure commercial agency, adding residential agency eight years ago. When agency work started drying up in September 2008, Robinson looked at other areas to generate fees and started to beef up the consultancy side of the business. Fee structures were also changed, and monthly or quarterly fees were negotiated to maintain cash flow.
“The fee income has of course decreased, but the extra work has gone some way to plug the gap and enabled us to keep the business going,” he says.
The recession has also established new business relationships, and Robinson says he now works closely with some of the other small agencies in Kent, sharing occupier details and fees if deals come off. “If it means opening up the market for clients, then why not?” he says.
In 2008, Robinson also added residential lettings to the company’s portfolio. It proved to be a good move. Last year, residential lettings accounted for 25% of the business, with consultancy and management also providing 20% of the turnover.
Residential sales and agency turnover have both dropped to 20% and 35% of the business, respectively, compared with 2007, when 40% of income came from residential sales and 50% from agency.
“I hope to carry on the consultancy work as the market recovers and hopefully that will enable us to expand the business,” he says.
Karrison’s agency work dropped from 60% of turnover in 2008 to 35% in 2009
The medium-sized firm
Caxtons
“We were a very young firm and hadn’t been through a recession before, so we felt it more sharply,” says Caxtons’ chairman James Pilcher, when talking about the firm’s launch in 1990 and the subsequent recession. “We were a bit gung-ho and I don’t think we looked at our business closely enough.”
Caxtons now employs 80 staff in three offices across north Kent, offering commercial and residential property services.
Those early experiences have prepared the firm for dealing with its second recession. “We are not bombproof, but we are in much better shape this time,” he says.
Part of being in better shape is running a much tighter business, keeping a close eye on finances and having a broader business base.
Where work in one area – for example, commercial agency – has declined, other opportunities have opened up, such as business rates appeals. Pilcher says that income from residential and student lettings has increased, and there is still a good appetite for investment deals from clients.
“It has been OK,” he says. “Agency fees are down, rent review work is down, but some of our income streams are up. Where the money is coming from has changed.”
As a result, Pilcher says that the firm has maintained turnover but suffered a slight dip in profits because of the increase in costs from taking on extra staff – something virtually unheard of in the agency world last year.
There have been no redundancies, but a couple of retirements have allowed staff to be redeployed into other areas of the business. Pilcher says the firm has been keen to take advantage of the availability of good-quality staff in readiness for the upturn.
Increasing staff costs is a risk, but he says: “We always struggle to recruit in the good times because we are close to London. Now the high-speed rail link makes it even closer, so in tougher times it is good to look for new staff as there is less competition.”
Caxtons staff numbers up from 75 to 80 in past 12 months
The big national firm
Knight Frank
Knight Frank is one of the few national agencies to have a firm foothold in the Kent market.
Partner Emma Goodford points out that, from the end of 2008 to the end of 2009, there was only a 20% drop in the amount of space transacted in the county, compared with 62% for the same period in the Thames Valley area.
But this does not mean that things have been easy. Goodford works with a team of three who track the market on a day-to-day basis. She says that the lack of speculative development means development consultancy work is “dormant”.
“We are having to be a lot more proactive and think more laterally in terms of doing deals,” she says. “We are putting in more hours to get less return.”
That lateral thinking involves a lot more research, and digging out leads from the company’s large database in the form of upcoming lease breaks, and occupiers that are in out-dated buildings or which are merging.
Saving costs has been key to the strategy. Knight Frank is agent for Kings Hill Business Park and has worked with the landlord to reduce service charges so that savings can be passed onto tenants.
“Is there money for us in doing that? Well, it might help us to secure lettings more quickly, which is good for the landlord,” she says.
Goodford does not anticipate a return to speculative development until at least the end of the year, and will be focusing on prelets in the meantime.
Volume of space transacted end of 2008 to end of 2009 dropped 20%
