UK property brokers fear bank-style jobs cull

August 7, 2008
UK property brokers fear bank-style jobs cull
Rumours that big players plan 5,000 redundancies as demand tanks, but
some analysts dispute that figure

(LONDON) With much of the European real estate market on its knees,
the painful death of job security is now haunting property brokers as
well as investment bankers.

High-flying real estate dealers are leaving their favourite tables at
expensive London restaurants vacant, awaiting a purge that will have
much in common with the one that has rocked Britain's banking sector
this year.

Property booms fed and were fed by the global credit boom that ended
abruptly last year when US mortgage defaults began to mount, and
investment demand in the UK and US property markets has crumbled in
the credit crunch that followed. Now other European markets are
wilting fast and job losses may not be confined to those frontline
bear markets.

'Property is a cyclical business and contraction will be inevitable
as firms look to be more streamlined,' warned British Property
Federation chief executive Liz Peace.

Rumours abound that some of the biggest employers in real estate are
bracing for a phase of redundancies which could cost up to 5,000
property professionals their jobs across their European, Middle
Eastern and African (EMEA) operations.

Not everyone agrees headcounts are under such strain.

'Markets like Eastern Europe, Russia, Ukraine, Turkey are still
growing, so it would be ludicrous to downsize European businesses
anywhere near that figure,' said Paul Bacon at property consultant
Cushman & Wakefield, referring to the rumours of 5,000 job losses.

'We have absolutely no plans for wholesale redundancies in the UK,'
said Mr Bacon, who is head of EMEA business.

Major emerging markets have so far escaped the worst of the credit
crunch. However, the credit boom that preceded it fed foreign
investors' appetite for property as well as other assets in emerging
markets.

'There are a number of markets where (property) prices have risen
very quickly,' said Robert Maciejko, managing director for Central
and Eastern Europe at global management consultancy Oliver
Wyman. 'The issue is when the Brits or the other foreign investors
are no longer investing, or even looking to sell, and that's when
prices can really go down.'

According to data from Cushman & Wakefield, European property trading
volumes have slumped 63 per cent year-on-year to 25.6 billion euros
(S$54.7 billion), leaving many brokers in Spain, Ireland, Germany and
France fearing redundancy.

One market analyst, who did not wish to be named, said a flurry of
corporate takeovers executed in the twilight of the property cycle
had left titans like CB Richard Ellis (CBRE) and Jones Lang
LaSalle 'thick around the middle' - with too many support staff
playing piggy-back on fewer high fee-earning brokers.

'We have grown market share considerably in recent years, partly due
to organic growth and partly through acquisitions,' said Alastair
Hughes, head of EMEA at Jones Lang LaSalle (JLL). 'These acquisitions
were either to expand our geographic coverage or to strengthen
existing business areas. None were predicated on a continued capital
markets boom.'

Figures posted last week showed sinking second-quarter profits at
both firms but overall revenues in JLL's EMEA division were 20 per
cent higher than the corresponding period in 2007 as the firm racked
up lower- margin advisory business to offset an abrupt halt in
building sales.

'Property services firms are all having to adapt to more difficult
market conditions,' said Mr Hughes, who described the rumoured threat
of 5,000 job cuts as excessive. 'The industry will have to manage
costs accordingly because it is unlikely that the capital markets
will recover in 2009, and likely that the leasing markets will
continue to soften.'

London-listed global consultancy Savills told Reuters it had embarked
on a cost-cutting programme that included some redundancies but it
would not discuss details.

Mr Bacon said Cushman was still keen to make strategic
appointments. 'Our European business has expanded rapidly in the last
five years but the quid pro quo was we couldn't grow as fast in the
UK. This gives us a chance to address that,' he said.

CBRE, the world's largest property consultancy, said it
was 'naturally focused' on cost cuts that would provide 'meaningful
bottom-line benefit' and that it had shed a modest number of jobs in
business areas hardest hit by the market downswing.

Paul Soothill, head of property and facilities management recruitment
at Joslin Rowe, said property firms hoped to redeploy staff to areas
like outsourcing, which can help UK corporates to manage their real
estate more cost-effectively.

Average UK commercial property values have tanked by almost a fifth
since the collapse of Britain's white-hot commercial property market
in June 2007.

In the same way Britain starts sniffling when the United States
catches a cold, where the UK real estate market goes, many European
property markets tend to follow.

'Many of the big firms have been here before,' said the British
Property Federation's Ms Peace. They 'know what they need to do to
weather the storm'.