Just take a walk around your local suburb to see which types of businesses have ceased to exist, or have moved to consolidated sites for scale or due to acquisition by a competitor. Video rental shops jump straight to my mind, followed by garages that repair vehicles and sell fuel.
New business models
The internet and Foxtel supported by other distributors heralded the demise of the local video shop by 2000. In recent times consolidated resellers like JB Hi fi and online providers have sealed the fate of all but the few outlets that remain using the same 1970’s rental model.
In recent years local garages have been closing at a fast rate in the suburbs, as they have failed to compete with the so called “discount fuel” supplied by large supermarket owned outlets, normally on large main road sites. Another shopfront retail business; book selling, has also been in a state of change for some time as many switch to online buying for convenience and value.
So are these examples, a sign for real estate agents?
Well not so far. As one real estate office closes, another appears soon after. This is most common when a franchised office closes, or changes location. Then there is the switch from franchise to an independent arrangement, which often results in a net gain of an office in a nearby suburb as the franchisor finds a new local agent willing to take the plunge and start-up.
Current world (Australian view) real estate
Today in Australia over 70,000 people travel every day to their “high street” office which is one of approximately 10,000 real estate businesses that focus on selling and managing properties for 22 million Australians. We all agree that managing and selling property is a people centric business and therefore we need to frequently engage face to face, on the telephone, by email and through other internet and core business systems.
The typical business employs seven to ten people focused on selling or managing properties. They spend approximately $400K to $800K on people costs and $40K to $80K on premises costs. Of course some larger businesses employ over 100 staff, but these types of companies represent less than 5 per cent of the market. So it is clear that office costs are a very small part of day to day operational expenses, assuming the fit-out and office size are realistic.
New technology
The past five years have seen significant developments in:
– mobile solutions and applications
– new software as a service (SaaS) products where in-house servers are not required, often referred to as “cloud” solutions
– and the explosion of general internet services designed for real estate business.
Adopting new solutions has been assisted by faster and cheaper carrier services both on fixed line and mobile/wireless platforms. And it’s interesting to note that although we all consume more, costs have tended to remain constant or at least have not set off alarms with financial controllers. So technology can allow us to work away from the office and remain in contact with our colleagues and clients at the same time. But do we still need an office to practice in real estate?
John Goddard, General manager marketing and sales at Rockend
