How much would a London Lettings Agent be Worth?

It looks like a London Lettings Agent would be worth well over a million pounds judging by today’s announcement of a buyout of the Leaders chain of 42 Letting Agents, based in SE England. The existing business has been bought for £35M with a further £12M earmarked for expansion.

Lettings Agents are seen as so valuable because while the house buying sector may be suffering in the economic downturn, the residential lettings market is booming – worth £2.5bn, growing at 9pc a year, across the UK about 12pc of properties are privately rented, but this rises to 17pc in London and the South East, where Leaders operates. Since 2005, the company has bought and integrated 31 Lettings Agents, with revenues growing at 28 per cent per year to their current level of approximately £25m. The rental proportion of the property market is expected to increase dramatically due to the housing shortage and decreasing affordability. Young people are also increasingly opting to rent as a lifestyle choice.

Nevertheless the high valuation of Lettings Agencies contrasts dramatically with reports of the death of the traditional Estate Agent. New kids on the block (iSold, Tepilo, Google, iTurnip – to name just four recently mentioned in the press) offering internet marketing of properties directly to the vendor without the use of an agent, have been taken widely to herald the end of the High Street Estate Agent, and most Estate Agents are also Letting Agents. Is there a contradiction in the two trends?

An Estate Agent is principally a salesman selling a product (a flat), they have no influence over the flat, or even it’s presentation – can you imagine an Estate Agent saying “I have to redecorate your hall before I can sell your flat”? In contrast a Letting Agent is often responsible for the management of the property and it’s tenant on an ongoing basis. The Estate Agent is most likely to be representing a resident Vendor, the Letting Agent is very often acting on behalf of a remote Landlord.

These are the reasons why the Estate Agent of the future may disappear into a website hosted in India, whilst a new breed of Letting Agents are renting their old offices, and presenting flats to a high street near you.

High Street Letting Agent