Empty Stores: Are There Risks in Investing?

Empty Stores: Are There Risks in Investing?

Over one year after BHS’ collapse, more than two thirds of its stores still lie empty according to research by The Guardian. Of the 164 stores nationwide, only 52 have new tenants or a deal for a new occupancy.

Some of the UK’s larger cities have lots of empty stores, and are managing more challenging high street conditions.  Other areas are suffering, and the lack of take up for ex-BHS occupied property is telling.

At the same time as a commercial property slowdown that is also affecting London, there has been concentrated property investment activity on the part of local councils, according to the Financial Times.

Do these developments suggest a looming property crisis, combining underdevelopment in some areas with over-exposure to risk in others?

 

Changing Habits

Paul Giness of The Beattie Partnership specialises in rating, and he points out “Some commercial landlords may be reluctant to take back BHS properties from administrators if it means they will be liable to pay business rates or other charges on their vacant properties.”

“It may come down to the stores’ liquidators exercising their power to terminate leases if landlords aren’t offering to do it themselves,” he states.

Paul also points out that how people shop is undergoing changes, with online shopping supplanting the traditional high street.

“BHS’s collapse has meant there are now large amounts of retail space available at a time when investors are increasingly cautious,” he says.

There is also the fact that in the decade preceding its collapse, BHS had severe under-investment, meaning that its now empty stores will, in many cases, require extensive refurbishment for anyone taking them over.

 

“In a tough climate for retailers, taking on the expense of refurbishment and modernisation, with factors such as asbestos removal to consider, is going to put some investors off”

Paul Giness, The Beattie Partnership

 

The Property Investment Flipside

Not everyone is viewing property investment with caution, with some local authorities continuing to invest in property.

According to the Financial Times, local councils in England have been borrowing at a low yield from the Treasury’s Public Works Loan Board and investing it in high-yield commercial property.

“This seems to be a gamble,” Paul observes, “because if the property market really slows down, or in a worst case scenario, crashes, then this will leave local authorities seriously over-exposed.”

Paul’s advice to commercial or corporate property investors is to look for professional guidance.

For advice on weighing up the risks and costs of investing, including those associated with business rates, please call The Beattie Partnership on 0161 228 2224 or visit bepart.co.uk.