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Monday, 22 August 2011

Low Rent

The BPF/IPD Annual Lease Review (which of course you read about first here!) has been presented to TV personality, Queen of Shops and government advisor Mary Portas, as an important contribution to her review of the High Street, says the British Property Federation (BPF).

Separate independent IPD data has also been submitted, illustrating that in real terms high street shop rents have fallen by a third over the past 20 years.

Portas, who is in the midst of her review, has indicated she is keen to understand the relationship between landlords and occupiers, and current trends in leases.

I summarised the main findings of the Lease Review in my post Lease Lengths are Getting Longer.

Looking specifically at retail, the key findings from a study of 47,708 retail tenancies that will interest Portas are that retailers benefit from the most flexible lease regimes ever – with the data showing:

·         Average lease length of 5.7 years.

·         Significant increases in break clauses as retailers look to hedge against economic uncertainty.

·          34% of new leases for high street shops have a break clause, up from 3.9% in 1999.

·         An average ‘rent free’ period of 10-months on a rent-weighted basis.

The separate IPD data on standard shop rents shows that whilst inflation has risen by 94% since 1989, rents for standard shops have only risen by 24%, and in real terms therefore fallen by 37%.

Rental growth for Standard Shops since 1989 has been 51% in Central London, 24% in the rest of London, 10% in the rest of the South East and Eastern regions and 25% in the rest of the UK.

The BPF makes the comparison with rate increases, which because of their link to RPI, has seen the rates bill for shops rise, roughly speaking, by 94% since 1989.

The rates burden on small businesses surely needs to be reduced if we are going to have the private sector-led recovery on which the government is pinning its hopes.

The property industry has had to adapt to the complex issues facing high streets and the difficult economic conditions – so should the government.

The old boy pictured above had some pretty innovative ideas on property too, but I can’t see a self-styled shopping aristocrat, or anyone else for that matter, being too interested in them...yet!

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