Town Centre Rents

[locutus]

I'm thinking about taking on a new retail space in a regional town centre. But in my opinion, the landlords are asking for absurd money, especially in the current retail climate. Maybe, I'm totally wrong.

I have a unit in a town centre, and I've seen similar and smaller sized units asking for treble the rent I have now (I issued a break notice). I had an telephone evaluation of the rent done late last year, and they said the rent I was paying was pretty much right, maybe a little bit too much, but not unreasonable. I know it's a telephone evaluation, but the person I spoke to was the regional director of the agency (Hicks Baker), and had previously let the building years ago, so was very familiar with the building, the business, as she let the building to the people I bought it from! I kind of wish that I didn't break my lease!

What's the best way in negotiating with these places? I just feel like these units are going to sit empty for a long time. Some have been empty for 2 years. I really have no idea if 2 years is normal for a unit.

 

[Mr D]

Offer a sum you feel is appropriate.
Worse that can happen is they reject the offer.

 

[locutus]

Offer a sum you feel is appropriate.
Worse that can happen is they reject the offer.

Ohh, I agree Mr D, the problem is that they are asking for £60k a year. I'm looking to offer a fraction of that.

 

[Mr D]

Ohh, I agree Mr D, the problem is that they are asking for £60k a year. I'm looking to offer a fraction of that.

Then either they jump at a tenant willing to pay - no guarantees at this point - or reject. For now.
Certainly would expect over next 12 months for a lot more landlords to be more flexible about getting tenants.

Not all of them will have discretion. If a pension fund buys a building for a million then it expects a return after costs of some sort.

 

[Darren_Ssc]

What's the best way in negotiating with these places? I just feel like these units are going to sit empty for a long time. Some have been empty for 2 years.

Walk away and keep looking. Some landlords don't need the money and will keep a building empty for 50 years rtaher than make a concession.

You don't need to handicap yourself with an unrealistic rent bill.

 

[locutus]

Walk away and keep looking. Some landlords don't need the money and will keep a building empty for 50 years rtaher than make a concession.

You don't need to handicap yourself with an unrealistic rent bill.

I agree that there are some landlords like that. But I'm not going to shell out £60k for a place to rent under any circumstances.

 

[Bob Morgan]

I'm thinking about taking on a new retail space in a regional town centre. But in my opinion, the landlords are asking for absurd money, especially in the current retail climate. Maybe, I'm totally wrong.

I have a unit in a town centre, and I've seen similar and smaller sized units asking for treble the rent I have now (I issued a break notice). I had an telephone evaluation of the rent done late last year, and they said the rent I was paying was pretty much right, maybe a little bit too much, but not unreasonable. I know it's a telephone evaluation, but the person I spoke to was the regional director of the agency (Hicks Baker), and had previously let the building years ago, so was very familiar with the building, the business, as she let the building to the people I bought it from! I kind of wish that I didn't break my lease!

What's the best way in negotiating with these places? I just feel like these units are going to sit empty for a long time. Some have been empty for 2 years. I really have no idea if 2 years is normal for a unit.

Did you check to see that she was a 'Companies Act Director' and this was not just a title that she had been given. Many Property Agents carry the title of 'Vice President' - But, it means absolutely NOTHING!

 

[Chris Ashdown]

Nasty landlords investing in property and wanting to make a profit, how dare they

 

[locutus]

Did you check to see that she was a 'Companies Act Director' and this was not just a title that she had been given. Many Property Agents carry the title of 'Vice President' - But, it means absolutely NOTHING!

I didn't check, but I would be surprised if she was a corporate director. But that still doesn't make her opinion or valuation invalid.

 

[locutus]

Nasty landlords investing in property and wanting to make a profit, how dare they

Some don't invest. That's a problem. But, apart from that, I agree with you.

 

[Mark T Jones]

There are 2 versions of the 'right price'. One is market price, the other is the price that works for your business.

Obviously you want the cheaper, but the second is the one you really want to be focusing on.

Do you definitely need to be on the High Street? If so, have you fully reasrearched which High Street & which location actually works for your business?

Whilst I don't totally subscrivbe to the whole 'High street is dead' notion, it will cetainly be fundamentally changed as we emerge from lockdown; have you factored this into your plans?

As a broader response to your question; the general feedback is that bigger corporate landlords are standing firm on rents (this relates in part to their banking covenants ), but will offer concessions such as rent-free pereiods or contributions to fit-out costs, wheras smaller landlords are more likely to negotiate on rents.

 

[locutus]

There are 2 versions of the 'right price'. One is market price, the other is the price that works for your business.

Obviously you want the cheaper, but the second is the one you really want to be focusing on.

Do you definitely need to be on the High Street? If so, have you fully reasrearched which High Street & which location actually works for your business?

Whilst I don't totally subscrivbe to the whole 'High street is dead' notion, it will cetainly be fundamentally changed as we emerge from lockdown; have you factored this into your plans?

As a broader response to your question; the general feedback is that bigger corporate landlords are standing firm on rents (this relates in part to their banking covenants ), but will offer concessions such as rent-free pereiods or contributions to fit-out costs, wheras smaller landlords are more likely to negotiate on rents.

Good feedback Mark. My customers like that we are in the town centre.

I also understand that the larger landlords are not likely to negotiate as much on the rent, but able to offer concessions. But if their shop stays empty for 2 or 3 years, with no rent, and having to pay rates, I would have thought realism would set in?

 

[Chris Ashdown]

Location does depend on a lot of things but many find that local advertising and a niche product range can mean you can be based anywhere in the town

Footfall is important to some traders like sweet shops or clothing which may dictate the high street, but a model shop, curtain shop and many other may save a small fortune buy moving to quiter places with free parking and advertising quite cheaply locally where they are situated and £10-20K buys a lot of local advertising

 

[Mr D]

I agree that there are some landlords like that. But I'm not going to shell out £60k for a place to rent under any circumstances.

Then don't shell out that money.
Instead find somewhere for the money you are willing to shell out. Even if its a lot less suitable its also cheaper.

 

[Mr D]

Location does depend on a lot of things but many find that local advertising and a niche product range can mean you can be based anywhere in the town

Footfall is important to some traders like sweet shops or clothing which may dictate the high street, but a model shop, curtain shop and many other may save a small fortune buy moving to quiter places with free parking and advertising quite cheaply locally where they are situated and £10-20K buys a lot of local advertising

Indeed - some businesses move away from the high street altogether.
Several of the hydroponics suppliers I use have one or more shops - on business or industrial parks.
Go in, browse around, buy stuff - everything is like high street except the parking is a lot easier and there isn't a big window.
And rent a lot lower than town centre.

My local art shop moved from a very expensive town centre address to a business park about a half mile away - rent less than 10% what it was for a bigger space. She lost the passers by but retained those wanting her goods. And its a lot easier to park.

 

[The Byre]

I kind of wish that I didn't break my lease!

Be thankful that you did! Town centres are dead, D.E.A.D. dead! Stoners! Gone - and good riddance! They were close to death before C19, but now - well, just look at the footfall! It's like walking onto a disused movie lot in some towns!

That gives me ideas! We could do a whole film shoot in some areas and we could get away with zero location fees - nobody would be inconvenienced as nobody is there to even notice what is going on!

 

[Paul Norman]

Do not be tempted, however good the location, to go above the price that makes good sense for your business.

It would be better to never acquire the space than that, because at some point after falling into that trap your business goes broke.

But you know that. So you only offer that amount, and will get lots of rejections.

Which raises two points.
1. I said in my first paragraph not to go above the price that makes sense for your business. I should have clarified that I meant made sense for your business for each and all of the next 5 years (or however long the commitment is).

2. You might only get rejections. It might be that what you need is simply not currently available and the price which makes sense.

It is worth thinking about business alternatives to what might not be available, and might not make sense in 5 years time. High Street Retail space.

 

[Root 66 Woodshop]

Be thankful that you did! Town centres are dead, D.E.A.D. dead! Stoners! Gone - and good riddance! They were close to death before C19, but now - well, just look at the footfall! It's like walking onto a disused movie lot in some towns!

That gives me ideas! We could do a whole film shoot in some areas and we could get away with zero location fees - nobody would be inconvenienced as nobody is there to even notice what is going on!

Ohhh... Day of the CoviDEAD!



On another note: a good friend of mine has just taken on a unit on a busy main through road... costing an estimated £220 per month each for himself and two others... running a property maintenance and joinery business together... cheap as chips and over 1200sq foot... there were smaller units going at the same money with less than half the sq ft on the same bloody road...

Shopping around is definitely your best bet.

 

[Darren_Ssc]

It would be better to never acquire the space than that, because at some point after falling into that trap your business goes broke.

There are places near to my previous office that fall into this category and, anecdotally, they become available on regular basis due to businesses failing for the simple reason the rent is just too high.

Everyone thinks their business is going to be different despite the obvious fact that to keep paying silly high rents they have to have consistently silly high turnover.

 

[paulears]

My landlord gave me a price that is probably half what it went for, with the last tenant because he wants somebody permanent, somebody unlikely to vanish and unlikely to cause grief. The tenant above me is lovely and been there 40 yrs, he and the landlord were looking for somebody (like me it appears) and I doubt he'd have found a tenant at the 'real' price. Any income is better than a higher income for a shorter period with a problem tenant. Is the price they want close, or just crazy for the building/space?

 

[Darren_Ssc]

My landlord gave me a price that is probably half what it went for, with the last tenant because he wants somebody permanent, somebody unlikely to vanish and unlikely to cause grief.

If anyone thinks this is a rarity, I have just experienced the exact same.

 

[Talay]

In the absence of rising interest rates, for rents to fall significantly, there needs to be a fall in the valuation of commercial property. As one leads to another, rents are supported by a willingness to remain empty rather than rent at unrealistic prices.

Smaller places are still being taken by hobby businesses which have no realistic hope of surviving a couple of years but who know no different.

The first question to ask is whether they are willing to include open market review at intervals. If not, I wouldn't bother wasting my time.

 

[ineedadollar]

Alot of these landlords are going to end up with empty properties long term. We are currently in a "city" and its in decline. theres shops empty everywhere more and more have been closing in the past 2 years compared to opening. Since all this hit our sales have been down 60% unfortunately our landlord isn't willing to work with us and reduce the rent. but as we are in contract we cant leave. but the grant moneys going to run out on paying their rent then we will have no option to close down. and if they come after me for the rest then i will probably have to declare bankruptcy. the shop next door to me is having the same issue as well as his next door. soon it will be an empty strip. on the road parallel to us theres more closed shops then open. prior to this the shop was empty for about a year before we came along and then it took them another year to sort out the lease. but seems the landlord would rather have empty property then reduce rent

 

[thetiger2015]

. but seems the landlord would rather have empty property then reduce rent

I think they're preparing for the change in planning laws - it will be easier to convert to residential now. They've already converted an entire row of shops near us in to blocks of apartments.

If WFH continues, I think lots more retail shops will be replaced with apartments.

 

[Mr D]

Alot of these landlords are going to end up with empty properties long term. We are currently in a "city" and its in decline. theres shops empty everywhere more and more have been closing in the past 2 years compared to opening. Since all this hit our sales have been down 60% unfortunately our landlord isn't willing to work with us and reduce the rent. but as we are in contract we cant leave. but the grant moneys going to run out on paying their rent then we will have no option to close down. and if they come after me for the rest then i will probably have to declare bankruptcy. the shop next door to me is having the same issue as well as his next door. soon it will be an empty strip. on the road parallel to us theres more closed shops then open. prior to this the shop was empty for about a year before we came along and then it took them another year to sort out the lease. but seems the landlord would rather have empty property then reduce rent

Indeed, they may be wanting all the shops empty so can convert to residential.

The few places I've seen where a block of shops in a row have been empty have been problematic to rent out again. As in a decade empty before this year.

 

[ineedadollar]

the council wont allow any of the ground floors to become apartments around here. my shop is on a strip where theres spoons on one end and a club on the other. I also think the building is listed so they wont be able to make changes to the extent they would need to convert it. so cant see that being the case

 

[Mr D]

the council wont allow any of the ground floors to become apartments around here. my shop is on a strip where theres spoons on one end and a club on the other. I also think the building is listed so they wont be able to make changes to the extent they would need to convert it. so cant see that being the case

Councils can be persuaded. If they need to give permission.
From what I gather the council doesn't get a say in everything planned any more. Some stuff is automatic - whether that would include that particular set of shops ....?
Or may be what the landlord is thinking.

 

[ineedadollar]

Councils can be persuaded. If they need to give permission.
From what I gather the council doesn't get a say in everything planned any more. Some stuff is automatic - whether that would include that particular set of shops ....?
Or may be what the landlord is thinking.

i think it varies between councils. but theres a building opposite which has become a block of apartments. the owner of the building wanted to make the ground floor apartments also but there application for that was rejected i believe.

 

[Chris Ashdown]

The Flats pay his living costs and profit, the shop will at some time get permission or get let

Bankrupsy has been on the cards for many years now with personal gurantees relitivly unknown not to long ago

Funny how everybody now sees the landlords as the greedy ones who should suffer like all others

 

[ineedadollar]

The Flats pay his living costs and profit, the shop will at some time get permission or get let

Bankrupsy has been on the cards for many years now with personal gurantees relitivly unknown not to long ago

Funny how everybody now sees the landlords as the greedy ones who should suffer like all others

my landlords are worth a very very large amount (close to a billion according to there site). they own apartments throughout the country.

however they only own 3 retail units. they can afford to take a short term hit or even have the units empty. so i would put them in the greedy category. but for me business cant go on like how it is. its not covering the rent nor wages. with the number of units empty retail units are no longer worth what they was 3 years ago. So landlords either need to lower their rent or have empty units

 

[Mr D]

my landlords are worth a very very large amount (close to a billion according to there site). they own apartments throughout the country.

however they only own 3 retail units. they can afford to take a short term hit or even have the units empty. so i would put them in the greedy category. but for me business cant go on like how it is. its not covering the rent nor wages. with the number of units empty retail units are no longer worth what they was 3 years ago. So landlords either need to lower their rent or have empty units

Their decision.

Perhaps this landlord won't bother about lowering rent - they want a return from their investment at their level or not at all.

 

[thetiger2015]

So landlords either need to lower their rent or have empty units

They'd rather wait and keep applying for permission to convert to residential.

The properties remain on their portfolio until such time as they can be converted either retaining the current building or via demolition and rebuild in to a bigger, taller building with more potential.

City centres are going to change. Parking fees keep going up, petrol/diesel costs are relatively high - it makes town and city centres unaffordable for every day shopping or buying small items.

The best way forward imo is to create smaller, independent quarters for individual retailers to develop their brands. Create the desire for people to spend a little on parking, so they can purchase something unique.

I fear though, the plan is more toward out of town big brands and out of town distribution hubs. They seem to be moving away from helping small businesses and ideally want everyone on PAYE, working for a fulfilment hub - it's easier. They can tax at source and the big companies have the admin staff to deal with it all and use all the online systems. Limited government input required, lower government/council costs and potential to redevelop entire towns and cities in to mostly residential/a couple of supermarkets.

Urban planning would be so simple. All houses/flats - sprinkling of Tescos. Jobs done. (horrible and not at all world beating).

 

[Chris Ashdown]

They reduce their rent and the others do the same, then someone else reduces further and so the downward slope it goes

How would you feel if somebody maybe your bank manager (if they still exsist) told you you should lower your profits to help out

Landlords are business folk and look after their own interests, I have never heard of the good days in retail where the retailers offered to share their profits with the landlords, maybe you were the exception

 

[ineedadollar]

They reduce their rent and the others do the same, then someone else reduces further and so the downward slope it goes

How would you feel if somebody maybe your bank manager (if they still exsist) told you you should lower your profits to help out

Landlords are business folk and look after their own interests, I have never heard of the good days in retail where the retailers offered to share their profits with the landlords, maybe you were the exception

it is in there interest to reduce the rent for a short period of time. based on how things are currently going they will have at least 1 maybe even 3 empty units within 6 months. they will lose out minimum a year before it is reoccupied. if they was to be able to accommodate 3 months half price on them it improves the chances of the businesses survival doesn't cost them much. From the apartments upstairs they generate at least 20k a week. they have over 20 property's but this is the only one with retail units. so we dont even account for 1% of the turnover. they have no other properties within the same area. so it wont effect them much if anything it makes there apartments upstairs more desirable and stops the building looking run down.

sometimes in business you might give a customer discount if they been a good customer and are struggling.

 

[Mr D]

it is in there interest to reduce the rent for a short period of time. based on how things are currently going they will have at least 1 maybe even 3 empty units within 6 months. they will lose out minimum a year before it is reoccupied. if they was to be able to accommodate 3 months half price on them it improves the chances of the businesses survival doesn't cost them much. From the apartments upstairs they generate at least 20k a week. they have over 20 property's but this is the only one with retail units. so we dont even account for 1% of the turnover. they have no other properties within the same area. so it wont effect them much if anything it makes there apartments upstairs more desirable and stops the building looking run down.

sometimes in business you might give a customer discount if they been a good customer and are struggling.

It's in your interest to have reduced rent. You see advantage in that for them - they may see things differently.

The fact it's a tiny percent of their turnover is not an advantage. It's a liability.

 

[Chris Ashdown]

You keep talking about one company, they may not be represetative of all landlords