The right moves: Rise of mixed use is key to JLL-Guardian deal
The acquisition of Guardian Property Asset Management by Jones Lang La Salle (JLL) underlines a fundamental shift in the operation of the market. The move will see JLL get directly involved in the residential market, a sector of the industry which some of the commercial agents would traditionally have regarded as secondary.
But market forces have changed that perception and commercial agents can benefit in many ways by broadening their horizons.
JLL Ireland was always a purely commercial agent and indeed there was a certain caché attached to that. Gunne sold its residential business following the acquisition by CBRE and Hamilton Osborne King separated out its residential business but reunited again under the Savills brand. Other mid-sized players have thus far remained firmly in the commercial space, probably relying on key individuals having residential expertise, but staying short of a full residential agency offering in a competitive market.
The biggest reason for this change in attitude is that planning policy for the last decade has been to encourage "mixed use" development. Instead of "stand-alone" zonings for office, retail and residential uses, planners now prefer to see these uses blended on the same sites, to provide more balanced and sustainable schemes. Thus we frequently now see blocks developed with retail uses at street level and offices and apartments overhead, with all uses supporting each other.
This means of course that when an agent is asked to advise on the development of a site, or the valuation of an existing block, they are at a disadvantage if they do not have the "in-house" expertise of agents who are operating at the coalface of the residential market. Developers rely heavily on their agents to provide them not only with advice on likely sale and rental values but also on the latest trends in what to build.
Up to the minute guidance is needed on what the market wants in terms of the size and mix of apartments and townhouses, layout, finishes and even down to advising on colour schemes and kitchen appliances.
JLL Ireland managing director John Moran confirmed this point for me when he told me that they realised that their development offering needed strengthening with residential expertise. "To grow this organically would have taken too long so the deal with Guardian was an ideal solution. JLL's acquisition of King Sturge in the UK in 2011 was for exactly the same reasons." he said.
Another factor in all of this is that after advising a developer on what to build, or advising Nama or a receiver on the value of a development, hopefully the next stage for the agent is the sale of the units and no agent wants to be sub-contracting the sale of the residential units and exposing their client to another agent.
Another force driving this change is that several of Ireland's biggest commercial developers were originally house builders who expanded into commercial development. Agents need to understand these developers culture, in order to forge long term relationships.
A further subtlety is the distinction between "second -hand" and "new homes", which are very different businesses. The former sector has one client, who may sell just two or three houses in their lifetime, and there is great emotion involved. With "new homes" agents are dealing with one developer client who is selling hundreds of units and agents operate this area much more like other commercial agency departments. Another growing influence is the demand for agents to handle the letting and management of residential units and I expect to see more agents adding this service line too.
The merged firms will be trading as JLL by Christmas. An interesting bonus for the firm will be the positive benefits of exposure to different ways of operating. I had experience of this when my firm Osborne King and Megran (OKM) merged with Hamilton and Hamilton (H and H) to form Hamilton Osborne King. OKM staff, mostly chartered surveyors, were seen as a "safe pair of hands", strong in commercial markets. H and H specialised in selling country houses, farms and fine art.
Whilst I'm sure that the larger OKM contributed great professionalism and expertise, there is no doubt that H and H brought a sharper businesslike approach, both to winning new clients and running the business.
Market forces have changed agents' perceptions. Residential property is central to the development mix and I expect to see more agents adding residential expertise.