ORGANIC RENT ROLL GROWTH – A SLOW GRIND TO SUCCESS
Meeting recently with both existing and new clients, to specifically review growth and profitability of their rent rolls, has yielded interesting observations.
We’ve compared our results to those areas identified in the current 2017 Macquarie Bank Benchmark Report. The Report provides a comprehensive overview of the industry, what challenges are around the corner and in some cases already here and what great performing businesses are doing to protect their profit margins and asset value.
The Report highlighted that most agencies growth strategies is based on:
1. Only organic growth – over 50%
2. A combination of organic growth and acquisition – 32%
The question must be asked…as market conditions are changing across the country, can agencies rely exclusively on organic growth alone? Our answer is a resounding no.
Our comments are based on the following observations:
- A slowdown in the number of investor sales.
- A tightening of monetary policy and FIRB guidelines to reduce speculative investors.
- A rapid slowdown in offshore investors’ appetite for Australian property.
- Slower future capital growth and rental growth with both plateauing.
- An increasing churn rate within portfolios.
- Pressure on management fees with business interrupters and new entrants into the industry.
With these factors in play, those agencies who are relying on organic growth only, will take them a significantly longer timeframe to reach their desired outcome.
Those agencies who use a combination of organic growth and a strategic acquisition are achieving their objectives quicker. Granted, there are numerous factors that come into play when purchasing an additional portfolio. Once the due diligence has been completed, the road to fast tracked growth, asset value and increased sustainable profit are in front of you.
Rebecca Clow, Managing Director of bdbydesign. is one of Australia’s foremost coaches, mentors and facilitators on rent roll strategies. A recent comment by Rebecca on where she is seeing change occurring in rent roll growth.
“The ultimate formula I continue to see is organic growth that is driven by a peak performance sales and relationship manager ( BDM or business owner) and acquiring rent rolls in desired territories which can add substantial value to the current portfolio if purchased with the right intent. Building a ‘Growth Team’ is essential to a thriving rent roll”
Anecdotally, our observations are those business who use a combined growth strategy approach are reaping the rewards, are ahead of their competitors and continuing to grow in a changing market.