In April 2017 over two thirds of BHS stores were still empty, one year after the retailer’s collapse. The Guardian’s research revealed that only 52 of 164 stores had new tenants, or secured deals.
This was the biggest high street failure since Woolworths in 2008, and while big cities appear to be weathering high street conditions, other areas of the UK are suffering.
There has been a property slowdown in London, with larger commercial property groups displaying more cautious activity. But at the same time, many local councils have been busy investing in commercial property by borrowing cheaply through the Public Works Loan Board (PWLB) which itself is under notice to be dissolved.
Do these things add up to a looming crisis in commercial property on the horizon?
Paul specialises in rating, and he points out, “Some commercial landlords may be reluctant to take back ex-BHS properties from administrators if it means they will be liable to pay business rates or other charges on their vacant properties. A lot will depend on the stores’ liquidators exercising the power to terminate leases when landlords aren’t volunteering to do so”.
BHS’s collapse has resulted in large amounts of retail space available at a time when investors are increasingly cautious.
“The climate is tough and factoring in the years of underinvestment leading up to the BHS collapse, anyone taking on the vacant property faces extensive refurbishment work, including things like asbestos detection and removal”
Overegging the Pudding
While high streets struggle, there is still some serious investment in commercial property going on, on the part of local authorities.
“According to the FT, English councils have been borrowing low yielding money from the Treasury’s Public Works Loan Board and investing it in commercial property,” explains Paul. “Given the uncertain property climate, and a general slowing down in some areas of commercial investment, the danger here is that local authorities are taking a gamble.”
The danger is that councils, through this borrowing and investment, could become over-exposed if, as the lack of take-up with the vacant BHS stores suggests, property is in an increasingly vulnerable spot.
To get a stronger understanding of your options for investing in commercial property, and managing business rates in these uncertain times, please call The Beattie Partnership on 0161 228 2224 or visit bepart.co.uk.