Real estate franchises with high overheads may close as market slows: One Agency CEO

Many businesses with high overheads, in particularly franchises, may close down due to an uncertain property market, according to the chief executive officer of One Agency Real Estate Group.

Speaking at the group's head office in Sydney, Paul Davies predicted that high overhead businesses will struggle in a slowing property market, where the rate of price growth for residential properties has declined in recent months, there is less turnover of properties, and pressure mounts on maintaining agents fee levels as competition to survive increases.

“Franchise offices in particular have added overheads, and may have difficulty maintaining the narrow profit margins, creating added stress to meet their high overheads” he said.

“I believe that many offices will close. The first will be ones with the slimmest profit margins, gradually followed by many others. I would go as far as to suggest, some franchises groups, that struggle to provide a fair exchange for fees, where their franchisees cannot justify the costs, will become irrelevant and cease to exist.”

He said the global trend is for better and cheaper products and services, and this applies to the real estate franchise environment as well.

One Agency helps real estate agents to establish their own agency for an establishment fee and a monthly fee. It claims it's not a franchise operation.