Dubai
It is more than a change of name that UK’s Savills is attempting buying up the property consultancy Cluttons’ Middle East operations.
Once all the pieces from the deal are put together, the new entity aims to have more of a say in the big-ticket global property deals that the region’s high net worth investors and institutions have a habit of doing.
“As Cluttons, we had never really focused on such transactions — what’s known in the industry as capital markets services — in the Middle East,” said Steven Morgan, CEO of Cluttons’ regional operations and who assumes a similar role at Savills. “But what we do have are strong ties with high net worth individuals in the region.
- Steven Morgan | CEO of Cluttons’ regional operations
“But Savills has had historic strengths in this line and retains strong investment teams. (Post-takeover), Cluttons M.E. can plug into those teams and assist in the flow of Middle East capital to key global cities.”
This is a space that the regional operations of JLL and CBRE have been exceptionally strong. It is also where some of the fattest margins in the real estate consultancy business lie. Middle East investment flows into global property has declined since 2014, when regional economies took the hit from the oil price drop. But chances of a turnaround in interest is being keenly speculated now that oil prices have recovered their footing.
The Savills takeover was announced earlier this month, with the confirmation that all of Cluttons’ 180 strong regional workforce would be taken in as well. The value of the deal has not been disclosed.
Cluttons has had quite a track record in the region over the decades. The UAE operations, represented through three offices, currently contributes nearly 50 per cent of its regional turnover.
“We have been very strong on the property management side within the region. But what we have never been able to do is demonstrate strength and depth internationally.
“As Savills, we can now demonstrate the high-end projects managed in London, Europe and Asia. Savills has the largest property management business in London at the moment.
“We will be looking to expand that capability around the Middle East. That was something, perhaps, we were not able to do previously as a smaller business.” (As Cluttons, property management represented 70 per cent of turnover from the Sharjah office, while in Oman it was around 50 per cent. In Dubai, property management fetched about 25 per cent of overall revenue.)
But the takeover does come with other changes. Savills was having a tie-in with UAE-based property services firm Core, which will now be terminated. There were also franchise businesses in Bahrain and Oman.
“For some time now, Savills globally had been leaning towards having wholly-owned operations around the world,” said Morgan. “The relationships they had in the Middle East before buying Cluttons was very much in the nature of associates.
“What the Cluttons Middle East business offered was a good fit. Nobody else has the geographical platform that we have, with offices in Saudi Arabia, Bahrain and Egypt, apart from the UAE.
“Our (Cluttons M. E.) investors were looking for an exit last October … I was very comfortable in approaching Savills at the time.”
Cluttons will retain its name until the year-end, through which time all of the processes should be complete. The transition to “Savills M. E.” will happen by next January.
“Geographically, we are pretty well covered at the moment and don’t see the need for new offices. Cairo is back on the radar in terms of corporate occupier demand.
“The changes will happen more on the service lines we provide and how we can integrate those into the Savills’ business. They are quite strong in Asia and Europe, which is why the Middle East is such a strategic acquisition for them. Initially, we will be linking into those large businesses in Asia and Europe to develop further our existing service lines and, perhaps, those we don’t have currently, which includes project management.
“We will be ready to go with the service lines we have identified to drive the future Savills business in these markets.”
