commercial property investmentRoses are Red, Violets are Blue, the High Street is dying, what shall you do?

Meet the Hillyer McKeown Commercial Property team.

The pain felt on the High Street has not just been felt in job losses (around 85,000 in retail in 2019) – it has spread to the pockets of commercial property investors too. This week Intu Properties, which owns the Trafford Centre amongst other developments, suffered a hammer blow to a planned cash bail out, when a Hong Kong-based investor withdrew from plans to invest in the Group. Intu has debts of circa £4.5bn, and is reported to be now worth less than £500m.

The rot shows no sign of stopping with empty retail units wherever you look. With supply high, and demand low, where once the returns on retail property were largely predictable, nowadays it is impossible to predict where rent discounting will end.

So, if you are a property investor where should you be looking?

Industrial property is doing well. In the biggest deal of its kind in 2019, Amazon signed up to a million sq. ft. distribution hub just off the M1 (they call them ‘fulfilment centres’). Demand for warehousing to handle all those internet orders is strong with rental growth in the sector reaching 3.6% in the year to September 2019 (MSCI Monthly Index). That compares to rental decline in the retail sector over the same period of -4.3%.

What’s next?

The industry’s view is that 30% of the UK’s shop space is redundant. Opportunities exist for re-imagining such spaces – with leisure and even housing on the agenda – but such is the fragility of the market that re-purposing is not for the faint-hearted.

As a tenant, cost control measures remains key in such straitened economic times with break clauses more frequently exercised and renegotiation with landlords more prevalent. As a landlord, the pressure to retain tenants and avoid empty units – and rates – has never been felt more.

Whether you are landlord or tenant getting early professional advice is essential to secure the commercial outcome you are hoping for – whether that be to carry on the letting, or to agree an exit.

If you do need any help managing your commercial property transactions – whether that is to stay or go – please send me an email or give me a call.  Otherwise, please message our Commercial Property team who can help you.

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