Property Matters, The High Street
Property Matters is our weekly look at the current big 'matters' in property.
In this programme Stephen discusses the underling issues that need to be addressed with the current demise of the 'High Street'.
Topics that are discussed:
- Reduction in business rates and the knock on affect to Council Tax
- Rent due to Institutional Investors affecting Pension Contributions
- Reduction in retail employment
- The issue of empty buildings
Stephen Galpin is a highly regarded corporate property consultant, justice of the peace and Freeman of the City of London.
Hello, and welcome to Property TV. I'm Stephen Galpin, and this is Property Matters, our five minute view of the property market.
I want to talk today about the high street. We've talked on many programs before on Property TV there about the demise of the high street, and what is going to take its place, and what form it will take in the near future.
Now, the problem is with the high street that we'll think, well, it's the worst we're going to experience, not being able to walk into Debenhams or whichever shop is closed. Any of the Arcadia group, they're all gone, and they've been on all our high streets across the country.
Is it just that inconvenience? Well, no, it's not. The reaches of the effects of the high street closing are widespread. Let's take it from the beginning. A big shop, let's take Debenhams on Oxford Street, a huge shop. It's closed. It's not reopening. So what's going to happen to it? Let's take, first of all, the business rates. Many millions of pounds are paid in business rates by that shop to the Westminster Council. They're going to be devoid of that income. That income of high business rate from the shopping centers in big city centers has subsidized council tax resolve for many, many years. If that subsidy is not available, it will affect us all. So that's the fact number one.
Secondly, rent is not going to be paid. Well, most of the big shops on the high streets are owned by what I would call the big institutional investors. I won't name them, but I think we all know who they are. Now, they are going to be devoid of this rental income from that great big shop, again several millions of pounds. And their shares are instrumental in sporting pension contributions across the country. Without those pension funds investing in the big landowners, the big property owners, their dividends will go down. Pensions will be harder to support. So yes, that affects us there too.
We then have the transfer of high street shopping to online shopping. Does that matter? Well, no, we all enjoy the online shopping that we're getting at the moment. The instant deliveries, the easy returns, everything else that used to be criticized with online, it's all over now. It's very efficient, very smart, very trustworthy. But it employs nowhere near the number of people. For instance, again, let's quote Debenhams. I think it was 13,000 employees across the country. Where are those people going to work? They're not going to find employment in the same industry, I don't think, in anything like the number they were. So that, again, is a burden on society, on the taxpayer. Everybody has got to be supported. We can't just let people drift into poverty. That's a further effect.
Now, I suppose the next consideration is we have that real estate on the high street, again let's take Debenhams. What are we going to do with the shop? Are we going to convert it into residential? Are we going to convert it into smaller shops? Well, let's look at those two options. Some people have been recommending that they should be turned into social centers, doctor's clinics, socially acceptable activity centers. But they don't produce money. They also would take a lot of conversion in terms of bricks and mortar to make them suitable. So that's not an easy option.
Turn them into smaller shops. Well, yeah, that's fine if you can find the shopkeepers who want to go in and take these smaller units. You might find a number of wanting to do so, but the real problem is, is who will own those shops? Who will be receiving the rents? The rents won't be so high. The covenants of the people going into shops won't be so good. So there'll be far from attractive.
Residential. Well, do you want to see a block of flats on Oxford Street or Regent Street or down in Knightsbridge or in your Birmingham city center or your Manchester city center? I don't really think so. It doesn't really quite work. But more importantly, the logistics of building such a project, which means demolition, reconstruction, foundations being dug, general construction going on in a very, very busy area, very, very difficult subject. So what I urge the government to do is, over the next months, while we have a quiet period where nothing really is going to change, nothing very much is going to happen while they're in this lockdown situation, they must bring in specialists to start planning for the regeneration of these high streets. It's now even more important than it ever was.
That's all for today. See you next time.