Consolidation starting to grip UK estate agent market

A trend of consolidation is emerging within the UK estate agency sector. Some agencies are strategically pursuing mergers and acquisitions to seize opportunities in the buoyant residential lettings segment, while others are feeling the effects of market pressures driven by the volatile UK economy, potentially pushing them toward selling their businesses.

The UK housing market is facing increasing pressure due to 14 consecutive interest rate hikes, resulting in higher mortgage costs. Consequently, the market is on track for its slowest growth in over a decade, accompanied by a sharp decline in house prices. As a result of sluggish home sales, the residential lettings market is experiencing significant expansion, with year-on-year rental growth reaching record levels.

In response to the slowdown in house sales, larger, progressive agents are increasingly looking to bolster their lettings business by hoovering up smaller regional operators, with several firms adopting a strategy of targeting small lettings firms in one particular region.

Bigger UK operators that have existing strong operations in both house sales and residential lettings are seeing market pressures as an opportunity to acquire smaller independent agencies that don’t have the same financial strength.

Meanwhile, others facing falling housing sales and commissions have become acquisition targets for overseas buyers, emboldened by the strength of their currencies and counting on the growing willingness of owners to sell in a tight market.

Falling house sales amid economic chaos
After the initial shock caused by the onset of the COVID-19 pandemic – which, understandably, virtually froze the market during the early days of the virus and associated lockdown measures – the housing market rebounded strongly.

House prices were boosted by record low interest rates in the wake of the pandemic and pent-up demand from those early months meant house sales recovered well. However, given the economic turmoil that has gripped the UK for much of the past two years, this has not lasted. No surprise.

The cost-of-living crisis has severely hampered the spending power of people in the UK, with inflation soaring and a run of 14 successive interest rate increases that has only recently come to an end (with the Bank of England holding rates level in its past two updates).

While the number of properties on the market is holding up, high inflation has led to soaring mortgage costs. Coupled with the reduced spending power of UK households, this has meant that fewer and fewer prospective buyers can afford mortgages.

As a result, house prices have fallen consistently over the course of 2023. According to Halifax, September saw the sixth consecutive month in which house prices fell, as a fall of 0.4 per cent from August continued a slide that began in April. House sales have, of course followed a similar trajectory, with sales down 4.5 per cent year-on-year in August 2023 and 4.7 per cent in September.

The net outcome of this is that the UK housing market is on track for its slowest year in a decade during 2023 and there is little sign of any improvement in the short term. While the recent run of 14 successive interest rate increases may have ended, many economists expect interest rates to remain high for some time yet, meaning that house prices and demand among potential buyers are both expected to remain constrained into 2024.

This has led to some high profile casualties in the sector, including online estate agent Purplebricks, once valued at nearly £1 billion. Earlier this year the company agreed to be bought by smaller rival Strike for just one pound, which assumed liabilities of the business.

While the housing market has been so depressed, this has – largely by necessity – pushed a growing number of people into lettings. As a result, while many estate agents are struggling, those with solid lettings businesses are finding themselves in a position of growing strength.

Lettings market thrives as sales plummet
As significant as the drop in the market has been, the concurrent growth in lettings has arguably been even more pronounced, given the influx of new renters who might, ordinarily, have been looking to buy a house (most likely, would-be first-time buyers).

Unfortunately for renters, however, landlords are forced to pass on the squeeze of higher mortgage rates, while these higher costs (and, subsequently, reduced margins) meaning that many other landlords are opting to exit the market.

This is leading to a lower number of rental properties coming onto the market, just as demand is reaching extraordinary heights. In a nutshell, the accumulation of all of these factors has led to a situation where rents are continuing their upward trajectory.

According to recent figures from estate agency Hamptons, residential rents were up 12 per cent year-on-year in August 2023 – the biggest increase on record. While this is bad news for tenants (and some landlords) it is opening up opportunities for some estate agents to expand and contributing to a growing wave of consolidation within the housing sector.

Market pressures enable consolidators to build scale in key areas
Not that these are boom times for all estate agents. All the aforementioned pressures on the housing sector, not to mention the wider challenges that businesses of all types across the UK are facing, mean that many are struggling – but this is a key element of the growing consolidation trend.

As some estate agents, particularly smaller operators and those that mainly rely on selling houses for their business, begin to struggle, bigger groups with strong balance sheets and business models more well-suited to the current environment have the opportunity to capitalise on increased willingness among owners to sell and grow through acquisitions.

This situation has seen several groups embark on M&A drives or ramp up their pre-existing dealmaking strategies to take advantage of the opportunities available to them in the lettings market.

Over recent years, Connells has established itself as the UK’s largest network of estate agencies, both through organic growth and through acquisitions, such as its 2021 takeover of major rival Countrywide. This model has helped the business build a network of 80 local estate agency brands in the UK and the company says that the current climate lends itself well to continuing this approach.

Speaking to the Financial Times recently, Chief Executive Richard Twigg said that Connells “remain acquisitive and seek to buy inherently good businesses”, adding that pressures on estate agents have resulted in a situation where many “smaller, less successful businesses may look to sell”.

Smaller companies are also using the prevailing market conditions as a prompt to grow through acquisitions, such as Derbyshire residential, sales and property letting firm Professional Properties, which recently acquired estate agency Amber Homes.

Professional Properties also demonstrates, however, that it’s not just acquisitions that are helping firms to capitalise on new opportunities. In November 2023, the company announced that it would merge with its estate agencies, recent acquisition Amber Homes and existing business James Cope Homes, to create a new group: cope&co.

Professional Properties was established 25 years ago by husband and wife Susan and Daren Cope. Since then, the pair have established the firm – alongside James Cope Homes – as a major force in the Derbyshire property market, but felt that a merger would enable them to go further and significantly strengthen their position across Derbyshire and East Staffordshire.

The merger, the first major rebrand in Professional Properties’ history, creates one of the biggest independent letting and estate agents in the region and primes the company for further growth in the current climate – with future plans including the launch of a new block management service at the beginning of next year.

Significant fragmentation points to huge scope for deals
Despite the massive disruption that COVID-19 initially caused for the lettings and housing markets, the major medium-term trend to emerge in the sector from the pandemic was significant growth, with the post-2020 period seeing a huge boom in the numbers of UK estate agents.

According to figures from estate agent comparison site GetAgent.co.uk released earlier this year, there was a 10.6 per cent increase in the number of estate agents across the UK between 2021 and 2022, with numbers swelling from 22,145 to around 24,500 in 2022.

Several regions saw particularly big increases in estate agent numbers, including the North East (up 14.1 per cent from 2021 to 2022), North West (13.5 per cent) Yorkshire and Humber (13.4 per cent) and London (11 per cent), providing a clear demonstration that booming demand post-COVID saw estate agents across the UK significantly ramp up their growth plans.

However, as the market has slowed over the past 12-18 months, this growth may come back to bite estate agents, with the risk that expansion happened at an unsustainable level for some or that smaller, independent operators that have set up shop since 2021 may be particularly vulnerable to challenging market conditions.

GetAgent.co.uk COO Mal McCallion commented: “It’s no coincidence that the number of estate agency branches has increased so notably since 2019, after which the pandemic market boom spurred an overwhelming level of activity.”

“The nation’s agents have most certainly decided to make hay while the sun is shining in this respect, but with the market now starting to return to normality, the challenge facing them is how they remain competitive and profitable.”

For a large number of businesses, particularly smaller estate agents without strong lettings offerings, remaining competitive and profitable is a tall order in such a challenging economy, meaning that there are likely to be many businesses that are more open to being acquired by a larger counterpart with the financial power to secure their future.

Significantly, the post-COVID growth means that the UK estate agent market has a high level of fragmentation, pointing to major scope for M&A activity to continue and even increase, should the current headwinds many firms are experiencing persist.

Against this backdrop, several estate agents are undertaking aggressive acquisition strategies aimed at consolidating areas of the market, expanding geographically, building scale, or, as has been seen in multiple M&A strategies, establishing a stronger position in one particular region.

Anyone with even a passing familiarity with London’s residential market will be familiar with Foxtons, which has 60 offices across London and the Home Counties. Since closing several London branches in 2018 amid a drop in house sales, the firm’s business has increasingly come to be defined by lettings – and acquisitions.

In 2020, the company inaugurated a lettings acquisition programme which focuses on growing non-cyclical and recurring revenue streams through the acquisition and integration of high-quality lettings businesses, mainly across London.

As of 2023, 70 per cent of the group’s revenue is derived from lettings, reflecting the non-cyclical, recurring nature of the rental market. Crucially, as the firm has said, focusing on growth in lettings is partly a de-risking strategy, moving its business away from the relatively volatile lettings market.

Clearly, given the current state of the housing market, this strategy appears to demonstrate significant foresight and the firm’s results appear to bear this out. Foxtons CEO Guy Gittins recently saying that, since inaugurating the lettings acquisition programme, the company’s portfolio has grown by more than 40 per cent and currently stands at more than 28,200 tenancies.

In its most recent deal, the company acquired estate agency Ludlow Thompson in a deal valued at £10 million. Ludlow Thompson was founded 30 years ago and operates from seven London branches, deriving more than 70 per cent of its total revenue from lettings, reflecting Foxtons’ strategy of targeting high-quality London-based lettings businesses.

The deal was Foxtons’ second of the year, following the March acquisition of lettings firm Atkinson McLeod, with the two takeovers representing an investment of £17.4 million and bringing in an additional 2,800 tenancies.

Guy Gittins commented: “Having established a leading position in its local markets and a reputation for delivering the best results for customers, it is clearly a business which we believe is a perfect fit for Foxtons.”

“The acquisition reflects continued progress against our acquisition strategy and our focus on growing recurring lettings revenues, and further supports the delivery of our £25m to £30m operating profit ambition in the medium term.”

As Foxtons continues to seek acquisitions in the London lettings market, it will not be short of potential targets, with the capital the most fragmented region in the whole of the UK. According to GetAgent’s figures, there are 7,155 estate agencies in London - around 29 per cent of the UK’s total.

The scope for consolidation within the lettings market - and particularly the opportunities for strong regional players to snap up local rivals at scale - is also certain to drive significant amounts of investment in the sector from investors such as private equity firms.

One major firm that has already attracted backing from an outside investor is estate agency giant Dexters, which last year announced a partnership with Oakley Capital, which will provide financial backing to Dexters’ growth strategy.

Dexters’ growth plans include opening new offices, developing its digital presence and services and expanding its market share through the acquisition of competitor firms. This was demonstrated with its acquisition of multinational LiFE Residential earlier this year, providing Dexters with a further eight offices across London and Asia offices in Hong Kong and Singapore.

However, the company is seemingly on the verge of an even bigger acquisition. While it has declined to comment, Dexters is reportedly set to acquire major London estate agency Kinleigh Folkard Hayward (KFH).

The deal would significantly boost Dexters’ already-strong presence in the London market, adding KFH’s 60 branches - and more than 900 employees - to its existing 155 offices in the capital.

Elsewhere in the London market, another private equity-backed estate agency seems poised to make a significant acquisition. Leaders Romans Group (LRG), which was formed through the 2016 merger of Leaders and Romans, has reportedly agreed a deal to acquire Stirling Ackroyd.

Like Dexters, LRG secured private equity backing in 2022 when it was acquired by Platinum Equity. While it has also declined to comment on reports of an imminent takeover, this financial backing has seemingly given it the heft to acquire Stirling Ackroyd in a deal that would add 31 sales and lettings branches to its existing London operations.

It’s not just major, established companies that are taking advantage of high levels of fragmentation in the market to make acquisitions, however. Smaller companies are also sensing an opportunity to grow through M&A deals and, given the huge scope for dealmaking within the sector, will also potentially be able to secure financing to help them secure this from outside investors seeking to enter the market.

Bristol Property Centre (BPC) is an estate agency based in the Redland area of Bristol. Founded in 2011 by director Ashley Day, BPC is a relatively small firm, certainly in comparison to a group such as Foxtons, but has established itself in the city and is now seeking to grow through acquisitions.

The company recently secured backing from Mercia Asset Management’s SME Loans fund, enabling it to make its first acquisition with a deal for Temple Homes Property, an estate agency based in the nearby Bristol area of Montpelier.

Ashley Day commented: ‘’We are thrilled to have acquired Temple Homes which is an established business with the same core values and principles as our own. We are integrating all the staff into the Bristol Property Centre family and will continue to provide a top notch service to Bristol landlords and tenants.”

Announcing the deal, Day said that the acquisition brings BPC’s portfolio to more than 350 properties across Bristol and added that the firm is “actively seeking” further acquisition opportunities as it looks to build its profile within the city.

Retaining the ‘local’ factor is a recurring feature of many of the roll-ups, which in most cases means keeping the brand name of the acquired business intact. Some of the acquirers will adopt a hybrid branding approach, where larger acquisitions retain their own brand presence, but acquisitions of smaller agents are assimilated into into the satellite brands. 


Fast-growing Lomond is a good example. It has bought five agencies over the past five weeks. The most recent being the sales and letting business of Howard & Co in Sussex. The lettings portfolio of 300 units will transfer to Michael Jones, one of Lomond’s two established south coast brands. Together with Brand Vaughan, they now have a 4,200-strong lettings portfolio on the south coast.

Lomond’s other recent acquisitions include Eve Brown Property Services and Garden Stirling Burnet in Scotland, plus the lettings books of Paul Carr and Royston & Lund in the Midlands.

Overseas buyers come knocking for major UK property firms
Economic uncertainty has come to define M&A in many UK sectors over the past year and one of the major trends to emerge during this time has been the interest that overseas buyers are taking in acquiring UK businesses

Spurred on by the weakness of the pound in comparison to some other global currencies (in particular, GBP/USD is well below its long-term average), international buyers with strong financials are well positioned to capitalise on growing unease among UK business owners and an increased willingness to sell or accept outside investment.

This has arguably helped the UK to be ranked as the top destination in Europe for inbound and domestic M&A investment for the past two consecutive years and it is a trend that is also beginning to be reflected in the estate agent market, with some major recent deals involving international buyers.

Given the huge pressure facing UK property firms, particularly those with greater exposure to the constrained housing sales market, it is perhaps predictable that we would begin to see an influx of investment from overseas and there are indications that this is taking shape.

Japanese housebuilders are also on the acquisition march, and are eyeing up a range of sector opportunities both in the UK and the US. Japan has a shrinking population and its 8.5 million unoccupied homes are set to balloon to over 20 million in the next two decades. Local companies like Daiwa House and Sekisui House must find growth offshore. Sekisui already works closely with Homes England and Urban Splash to deliver thousands of new homes across the UK. Mitsui Fudosan and Mitsubishi Estate, two of the biggest real estate companies in Japan, have recently confirmed plans to invest over £3.5 billion into the UK. With their presence rapidly growing in the UK property markets, it is just a matter of time before one of these behemoths makes a play for a local real estate chain.

Some of the biggest deals in the sector this year so far have involved international investment, as major companies face huge pressure to remain competitive against their rivals in a tense market. In a particularly notable example of this, online UK property portal OnTheMarket was subject to a takeover offer valued at around £100 million from US real estate group CoStar earlier this year.

The offer, which was accepted but remains subject to a shareholder vote, has already faced outspoken opposition from some shareholders in the company, but is described by backers as potentially giving the website the power to challenge its bigger online rivals Zoopla and RightMove. Indeed, following the announcement of the offer, shares in RightMove fell by 12 per cent.

A completed deal, meanwhile, saw one of the UK’s oldest estate agents, Chestertons, taken over by European real estate Emeria in a deal worth around £100 million. The deal followed a protracted turnaround process at Chestertons, which focuses on sales and lettings of upmarket London homes, after it was acquired out of receivership by Mercantile Group in 2005.

The acquisition sees Emeria acquire Chestertons UK business (with the group’s significant international operations remaining under Mercantile’s ownership), which spans 30 branches – up from just nine when the business was rescued in 2005.

Perhaps more interestingly as far as M&A in the wider housing sector goes, however, is the fact that Emeria is owned by Swiss private equity firm Partners Group. As both opportunities and challenges continue to emerge in the UK housing sector, and as economic uncertainty persists in the UK more broadly, we may see a growing number of major international investors look to enter the sector through acquisitions of large companies that face an uphill struggle to stay competitive.

While there is perhaps not quite a full-blown dealmaking boom taking place in the UK estate agency market, it is clear that all the requisite components are there for a period of prolonged dealmaking. Fragmentation is high in the wake of the COVID-19 pandemic and several firms have already identified acquisitive growth as the best way to consolidate and strengthen their position in the lettings market.

The sparks of revival are already beginning to flare again in the housebuilding market, as shares in most of the major groups - Berkeley, Barratt Development, Persimmon and Vistry Group have begun to climb over the past few months after a surprise drop in inflation, surge in net immigration and optimism in the market over the middle term - which should trickle down into the real estate agency sector.

As these conditions ferment, moreover, it is likely that more and more money (both from the UK and overseas) will begin to move into the market as investors seek to take advantage of a situation in which estate agencies are presented with both huge challenges and huge opportunities for acquisitive growth.

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