The last few days have seen one of the last bastions of the UK retail sector BHS apparently struggling for survival and on the brink of administration. British Home Stores is a company which has been around for many years and the company’s demise is yet another nail in the coffin of the UK high street. While there seem to be issues regarding trading and the pension scheme there has been an ongoing problem with the level of rent charged to the company.
High street rents
While there is no doubt that high street rents are seen as an avoidable cost by many retailers today, especially those focusing upon the Internet, it is not so easy for long established companies. When you also take into account the ever-growing cost of rates and other taxes such as VAT perhaps it is a little easier to understand why so many UK retailers are struggling.
It is not very often that we see individual shop leases up for sale with investors more focused upon shopping centres and out-of-town shopping areas where there is perhaps less risk. Many of the properties housing the likes of BHS are very grand old buildings which may well be worth more to their current owners as flats or offices. That is not to say that the UK high street is dead and buried but local authorities around the UK will need to address the problem of rates.
Looking into the abyss
Sometimes it is very easy to get wrapped up in problems regarding high street shops when in reality the majority of them also have a strong online presence. It is inconceivable to even think that retailer will at some point go 100% online but it is also foolish to believe the high street will not have challenges in the foreseeable future. This concern and disappointment regarding BHS will likely lead many property investors and landlords to reconsidering their positions at this moment in time. We can only await the knock-on impact to suppliers and connected parties in the event that no buyer is found for BHS and administration quickly turns into receivership.
Those who follow the property market will also be well aware of the ever-increasing cost to investors in the shape of increased direct and indirect taxes. At a time when shop landlords are looking for help it seems that the government has at this moment in time turned its back. In many ways it is only as we approach elections that the politicians take notice of employment numbers and indeed many of their promises to assist local businesses often fall flat.
Even though there are various rate reductions for empty or unused properties there is still an array of carrying costs. Will retailer property investors demand higher rental yields in the midst of this current uncertainty? Are there any other bastions of the UK retail market struggling to make ends meet? Over the next few days we will see an array of forecasts and analysis of the UK retail market and many property landlords will be watching these very carefully.