Over the last few weeks we have seen Toys R Us and Maplin go into administration with Toys R Us closing stores and selling off its stock. New Look has also announced the closure of stores and the loss of jobs. Last year saw one-third of major restaurant chains close restaurants. It seems to be a time of doom and gloom again with the possibility of the high street (and out of town retail parks) looking emptier and emptier.
Property owners must be beginning to wonder again what the future is for the high street/retail in general and what can be done to bring in an income from property owned – an empty property not only loses money through lack of rental income, but also begins to cost money through matters such as disrepair the longer it stands empty.
To protect their investment property owners might need to take a different approach for instance:
- Might it be time for a more diversified use to be considered for traditional retail space (e.g. medical, dental, leisure use)? A change of use might require an application for planning permission to be submitted, but it might give a different way to increase footfall.
- Would shorter lets with rolling renewals or break clauses be attractive to those new start-ups that want to take space, but are unable to (or indeed want to) commit to lengthy lease terms? This might not give property owners long term security, but it might fill a gap whilst the longer term tenant is found.
- Would taking a deposit up front on a new letting give a landlord the security it wants? If the tenant is not then able to pay the rent or does not comply with its repairing obligation under the lease (for example), a landlord has some piece of mind that it will have some protection for non-payment of rent and recompense for out of pocket expenses incurred so as to be able to let the property again. This would need to be carefully balanced with a tenant’s financial capability to provide that deposit.
- Is asking a third party to stand as a guarantor an option? If for any reason the tenant did not pay rent (due to issues such as bankruptcy or cash flow) then the landlord could call on that guarantee. The landlord should make sure that guarantor has the financial capability to perform, otherwise the guarantee is arguably only worth the paper written it is on.
There are options available and the above illustrates some of them. The question remains, however, as to whether or not acting in this way would save an emptying high street/retail space. Unfortunately only time (and perhaps a punt) will tell.