The partners at Knight Frank are set to bring home record profits after the estate agency managed to shake off the downturn in the premium home market.
The high-end agency, which has 70 equity partners, made a record £166.7 million of annual pre-tax profits in the year to 31 March 2018, equating to £2.38 million per partner.
This is well ahead of the vast majority of the UK’s top 100 law partnerships and only slightly below the £2.5 million per partner made by “magic circle” law firm Slaughter and May, The Times reported.
Knight Frank’s annual profits were 14% higher than the previous year, while group turnover increased by 10% to £525.9 million.
It also dwarfs profits per partner of the Big Four accountancy firms, PWC, KPMG, EY and Deloitte, which last year all came in below £1 million.
Knight Frank, which was founded as valuations, surveying and auctions business Knight Frank & Rutley in 1896, is known as a specialist estate agency for multimillion-pound homes. However, it also runs a global commercial property consultancy, publishes extensive research and is involved in sectors such as rented student accommodation and retirement living.
In practice, Knight Frank’s equity partners only receive some of the profits. Alistair Elliott, senior partner and group chairman at the firm, explained that a slice of the profits are reinvested in the business to help to fund future growth.
Roughly a third of Knight Frank’s business is in the UK, split between commercial and residential property markets.
Elliott told The Times that after a bull run of rising prices and healthy transactions for the five to seven years following the financial crisis, the high-end home sales market “has cooled year on year” for the past three years.
He said extra taxes, including the 3% stamp duty surcharge on second homes, was partly responsible.
Despite the slowdown in the prime residential market, Elliott said it was likely Knight Frank would be bigger in London in five years’ time because of the opportunities afforded by developments such as retirement villages and rented student accommodation.
Knight Frank acts as a consultant and adviser to some of the biggest players in both of these markets, including Unite, Legal & General and McCarthy & Stone.
Of the company’s 65 UK-based partners, 62 are men. Elliott said the firm has too few women at the top and is trying to change this.
DMZ thinks Knight Frank’s latest set of results demonstrates the strength of its diversified offering.
Although the prime residential market is suffering, this has been more than compensated for by the company’s interests in specialist sectors like retirement living.
A recent report by Knight Frank estimated the UK’s private retirement living market could reach a value of £44 billion by 2022 – an increase of 50% from £29 billion in 2017.
Growth is being driven by the increase in older people and greater investment into the sector as it matures.