When King Sturge bought Leslie Furness at the beginning of the year, it became the latest specialist retail agency to sell out to a bigger company. Similar acquisitions in recent years have left the number of niche agencies dwindling, with giant multi-sector agents taking the lion’s share of retail property deals. Yet, while there are advantages to working with a large global company, many property directors still see a role for the retail specialist.
High-profile acquisitions in the past few years have consolidated the retail agency market. In 2005, property giant CB Richard Ellis (CBRE) bought retail specialist Dalgleish for£21.4 million – a figure that CBRE was happy to pay to add Primark, New Look and Sir Philip Green’s Bhs and Arcadia to its client list.
The relationships that founder Malcolm Dalgleish had nurtured with retailers such as Green since setting up in 1979 were the key to CBRE’s takeover. While CBRE had a large global presence already, the dedicated knowledge that Dalgleish’s team had harvested from years of retail focus was a big asset.
CBRE’s takeover of Dalgleish was the start of a wave of high-profile consolidations, with Savills following suit with the acquisition of Blair Kirkman in 2006 and last year’s acquisition of Donaldsons by DTZ. Some of the larger specialist agencies, such as Churston Heard, Harper Dennis Hobbs, Hartnell Taylor Cook and CWM, have resisted offers of takeovers by larger agencies.
King Sturge had a retail team when it acquired Leslie Furness, but was still better known for letting sheds than shops. The retail specialist has brought with it clients including River Island, Arcadia, Waterstone’s, HMV and Vision Express. The expanded client base made King Sturge a stronger force in UK retail property overnight.
While specialist service is clearly a valuable asset, by their very nature niche agents cannot offer everything, particularly to developers of mixed use schemes which might also include housing or offices. So landlords often tend to go for bigger firms.
Martin Chase, who has been at Donaldsons since 1976 until it was taken over by DTZ, and is now DTZ retail chairman says: “If you’re an investor in a centre, it is fundamentally about building a business plan. You’re buying it for about 20 years and you can’t do that unless you asset manage. An agency needs to provide a comprehensive service.”
A drawback for retailers – although not in every case – is that a smaller agency may be less valuable when they want to expand internationally. A specialist retailer based in the UK has less clout abroad and, with most retailers contemplating or undergoing expansion into Europe, it can be useful to be represented by an agency that has ties on the continent. Claire’s Accessories, for example, has moved into mainland Europe working with CBRE, which has offices across Europe and strong relationships with continental developers. The accessories retailer plans to open 100 stores in Europe this year, 30 of which will be in Germany.
On a day to day level, the acquisition of a niche agency by a larger company often has little effect on its retail clients. When Dalgleish was taken over by CBRE, one of its biggest clients, Bhs, had to adapt to working with a larger agency. But the side effects of this change were few, according to Bhs property director Tony Hatch. “From our perspective, it’s been business as usual – there have only been relatively small changes to the service,” he says.
With retailers becoming increasingly demanding, agencies have had to improve the scope and range of their service. Retailers’ property strategies invariably involve plans for nationwide expansion and an agent must be able to offer its client opportunities for opening stores in multiple locations.
David Williams is familiar with both types of agency, having started out at Dalgleish before its takeover and now heading CBRE’s retail strategy group. He says: “Historically, you could be a small agency and have a few clients and it would work very well. The way things have changed is that clients demand so much more than they used to and agencies need to be able to represent every town in the country. You can either know the towns, or you can know the clients – you can’t really do both.”
For Williams, the takeover of Dalgleish has been entirely positive. Dalgleish had been growing steadily for years before the acquisition and had amassed a significant amount of influence across the UK, but it lacked certain offerings, he says. “CBRE added things on top of the core business, like distribution and head office requirements, that we wouldn’t have even tried to do at Dalgleish.”
For Nick Symons, a director at Savills, the acquisition of his previous company Blair Kirkman provided more opportunities for client focus. He says: “As a director, another benefit is having the time to focus 100 per cent on the client, rather than becoming involved in the day-to-day running of the business, which is inevitable in a small practice.”
Despite this, some retailers still harbour little enthusiasm for the bigger agencies, remaining loyal to specialists. With specialisation comes dedicated retail focus, a thorough understanding of the industry and closer ties between agents and their clients. For example, Philip Jenkins, property director at Crabtree & Evelyn – which has been represented by niche company Michael Pedder for more than 25 years – says the benefits of this patiently fostered relationship are many, because of Michael Pedder’s understanding of their business.
“We’ve worked with Michael Pedder for 25 years and they know our business almost as well as we do,” says Jenkins. “Retail is a funny world and it gives me confidence to work with people who know the industry.”
By gaining a name for itself as a retail specialist, a specialist agency can approach a developer with a number of clients as an attractive offering, which, says Jenkins, a landlord will be eager to consider.
“The advantage is that an agent can talk to developers on a new scheme with several interested retailers and we benefit from the economy of scale. Landlords are very keen to do a deal with Michael Pedder, because it offers many good names,” he explains.
By honing in on retail and only representing tenants, an agency can avoid the need to balance conflicting interests. Peter Courtney, director at retail specialist Lunson Mitchenall, believes that, with so many clients, large agents have to handle conflict when big retailers vie for the same space.
“CBRE is a fantastic company, but if I was a client of theirs, I might be cautious where they have to make a judgement about which clients get let into certain situations,” he says. “If you’re a major retailer like Sir Philip Green, you can throw your weight around, but most people aren’t Sir Philip Green and smaller companies could lose out,” he adds.
Jonathan Eastwood was director of central London retail at Dalgleish before it became part of CBRE, but left the company a year after the takeover and is now at specialist company Capital Retail. CBRE was not, he says, right for him and highlighted the differences in approach between large agencies and their niche counterparts.
“From my experience, I believe that niche practices have to promote a more proactive, entrepreneurial spirit,” says Eastwood. “The big companies benefit from strong individuals and a more rounded, multidisciplined service; as a consequence, their client base is often biased towards large multinationals.”
Having worked for both types of agency, Eastwood says it is the time and dedication that smaller companies can offer a retailer that are their biggest assets. He says their agents can spend time getting to know their clients, understanding the market and developing new brands. Eastwood believes that, to a smaller, specialist agency, getting a retail client on board means more to the staff involved and to the company as a whole.
“I can’t stress enough the difference that signing a new account makes to a small practice,” he explains. “It can make a huge difference to a company and really excites the business at all levels.”
Of course, retailers can pick and choose an agency according to the needs of an individual deal. Whereas a retailer that is looking for a lease in a smaller development may benefit from the expertise a niche retail agency will bring, it might choose to work with a larger company for another deal.
This flexibility available to retailers means that there is a place for both types of agency as and when circumstances dictate. As Hatch explains: “It’s horses for courses. If there is a specialist situation, we will go to someone who specialises in retail. You could find that, at a bigger firm like CBRE, there could be a conflict of interest and we always have to be mindful of that.”
Whether or not a retailer calls on a specialist agency depends on three key factors: personal relationships, site-specific requirements and the scale of a property strategy. If a relationship has been cultivated carefully over the years to the point where both sides have a mutual understanding, a specialist can play an invaluable part in the business. But, in terms of a wider property strategy that may involve international expansion, a larger, multi-sector company may bring opportunities beyond those of a niche agency.
Clearly, there is still a place for the specialist and, despite the consolidation, there is still room for everyone.