Jump to content
House Price Crash Forum
uztopride

One Store In Eight At Risk Of Collapse

Recommended Posts

High streets are facing one of their toughest months, with thousands of shops threatened by closure as rents fall due. Hard-up retailers face a nail-biting three weeks to find cash to pay their landlords after one of their leanest summers on record. After a poor start to the year, consumers have reined in spending even more recently. Experts fear Christmas will be one of the hardest in decades. Figures from accountancy firm RSM Tenon show 861 more retailers joined the critical list in the last six months, which means they may struggle to pay bills. Almost 9,000 retailers are at risk of ‘imminent insolvency’ – an eighth of the sector. Shops selling bulky, expensive items like furniture are most vulnerable. Quarterly rents due at the end of the month could prove the tipping point.

Share this post


Link to post
Share on other sites

So sacrificing the savers has not been the panacea King thought it would be, what a surprise

Spend your savings to buy Chinese made tat you don't need to "save" the high street.

And when the savings run out, then what?

China has made lots of money and the British public hasn't got a pot to p*** in!

Brilliant!

Share this post


Link to post
Share on other sites

Ooh my. The real story isn't the shops, but the rents. Rents get reduced to a level where a shop can make money, as the alternative is an empty shop. Which in turn makes commercial property lending go bad. Which puts banks that did lots of this lending in a spot. HBOS again springs to kind.

Share this post


Link to post
Share on other sites

Spend your savings to buy Chinese made tat you don't need to "save" the high street.

And when the savings run out, then what?

China has made lots of money and the British public hasn't got a pot to p*** in!

Brilliant!

Can't buy won't buy......Chutney for Christmas, its the thought that counts and the effort that goes into making it. ;)

Share this post


Link to post
Share on other sites

Ooh my. The real story isn't the shops, but the rents. Rents get reduced to a level where a shop can make money, as the alternative is an empty shop. Which in turn makes commercial property lending go bad. Which puts banks that did lots of this lending in a spot. HBOS again springs to kind.

Sadly ,many landlords prefer to sit in empty shops rather than let them out at lower rents. Indeed, I know at least one small retailer closing not due to lack of trade but exorbitant rent increases. Needless to say the UK tax system encourages this madness but supply side reforms in this area rather than the labour market are curiously absent from Osbornes plans. But then he and most if the current government just like its Nu Lab predecessors are devoted to propping up the rentier model. Protecting yield from rents is seemingly more important than profits from production.

Edited by stormymonday_2011

Share this post


Link to post
Share on other sites

Sadly ,many landlords prefer to sit in empty shops rather than let them out at lower rents. Indeed, I know at least one small retailer closing not due to lack of trade but exorbitant rent increases. Needless to say the UK tax system encourages this madness but supply side reforms in this area rather than the labour market are curiously absent from Osbornes plans. But then he and most if the current government just like its Nu Lab predecessors are devoted to propping up the rentier model. Protecting yield from rents is seemingly more important than profits from production.

They will only prefer to sit on empty shops if they think there is a good chance of securing a higher rent within a certain time span.....when that doesn't materilise they will cut their losses pretty quick, that time span is reducing all the time, then they will take what they can get and be done with it. ;)

Share this post


Link to post
Share on other sites

Sadly ,many landlords prefer to sit in empty shops rather than let them out at lower rents. Indeed, I know at least one small retailer closing not due to lack of trade but exorbitant rent increases. Needless to say the UK tax system encourages this madness but supply side reforms in this area rather than the labour market are curiously absent from Osbornes plans. But then he and most if the current government just like its Nu Lab predecessors are devoted to propping up the rentier model. Protecting yield from rents is seemingly more important than profits from production.

Kind of. Most retail landlords are large organisations with huge amounts of debt. They have built their business models on ever rising rents supported by ever rising consumer spending. If rents don't continue to rise and retail landlords go under en mass, they'll take the banking sector down with them.

At the moment our policy makers are sacrificing the retail sector in order to save the banking sector. There may come a point when this changes, but for the moment our leaders are more scared of a financial sector collapse than a retail sector collapse. The trouble is, with their current policies, they may end up precipitating the collapse of both.

Share this post


Link to post
Share on other sites

Kind of. Most retail landlords are large organisations with huge amounts of debt. They have built their business models on ever rising rents supported by ever rising consumer spending. If rents don't continue to rise and retail landlords go under en mass, they'll take the banking sector down with them.

At the moment our policy makers are sacrificing the retail sector in order to save the banking sector. There may come a point when this changes, but for the moment our leaders are more scared of a financial sector collapse than a retail sector collapse. The trouble is, with their current policies, they may end up precipitating the collapse of both.

That is exactly the issue. If you are a commercial landlord servicing a huge debt that you can only service if you get X rent per month.. you can't lower the rent below X, even if it means the thing is empty.

And like you said the model is actually based on ever rising rents. If you look at what commercial buildings sell for its not possible to even service the debt witht he current extremely high rents.. one must assume you can get constant rent increase for some years to come to even start breaking even.

Share this post


Link to post
Share on other sites

Kind of. Most retail landlords are large organisations with huge amounts of debt. They have built their business models on ever rising rents supported by ever rising consumer spending. If rents don't continue to rise and retail landlords go under en mass, they'll take the banking sector down with them.

At the moment our policy makers are sacrificing the retail sector in order to save the banking sector. There may come a point when this changes, but for the moment our leaders are more scared of a financial sector collapse than a retail sector collapse. The trouble is, with their current policies, they may end up precipitating the collapse of both.

Price is always dictated by supply and demand. It is irrelevant what landlords want to charge or have to charge, all that matters is what they can charge.

If a retailer leaves, they can accept a reduced rent from someone else, or risk leaving the shop empty with no rent and hope to get a higher one later. You don't need to leave the shop empty for long before you are losing serious money. Big landlords will know this, and negotiate to keep businesses occupying their shops. Of course sometimes they have to say no and leave a property empty so as not to be pushed over in negotiations, but they know how to maximise their profits. Some smaller landlords will keep rents vainly high however, leaving their properties empty.

Share this post


Link to post
Share on other sites

as harsh as it might sound, closing shops is good for bringing down land prices, commercial or residential. commercial property is prime land so falling values will affect the areas around it.

both sectors are interlinked in terms of the calculations for rental yields, and falling land prices will have a knock on effect on the housing market.

Edited by mfp123

Share this post


Link to post
Share on other sites

as harsh as it might sound, closing shops is good for bringing down land prices, commercial or residential. commercial property is prime land so falling values will affect the areas around it.

both sectors are interlinked in terms of the calculations for rental yields, and falling land prices will have a knock on effect on the housing market.

You are assuming that the land market is price sensitive.

However, the usual response from an extortionist when the profits of extortion fall is to extort more because that's their only trick. Rent and mortgages are very price insensitive and perverse for the same reason mugging is.

Share this post


Link to post
Share on other sites

If the landlords refuse to charge an affordable living rent...those that thought they needed a landlord will find or be forced to find another way of earning a living....where there is a way there is a will. ;)

Share this post


Link to post
Share on other sites

I don't know how Austin Reed make any money at all. I keep seeing coats for £75, reduced from £300. :huh:

Share this post


Link to post
Share on other sites

Ooh my. The real story isn't the shops, but the rents. Rents get reduced to a level where a shop can make money, as the alternative is an empty shop. Which in turn makes commercial property lending go bad. Which puts banks that did lots of this lending in a spot. HBOS again springs to kind.

Nothing prevents a retailer buying it's own premises; in fact some do (such as ASDA). The principle reason they do not is retailers require a higher return on equity than that provided by the implied yield a purchase would reflect (say 5-6% on average for a good(ish) high street.

Where the model can fail, is upward only rent reviews. As competition for stores in good locations (and in better times) can lead to the 'best' (read most profitable models) able to pay higher rents, GAP used to do this, but before so did the Phone shops, coffee shops and opticians. This sets rental evidence which can he applied to comparable locations - not much help if you are a Piano shop.

Once again, retailers can protect themselves from this by buying premises; or by agreeing a fixed programme of rental changes (set to RPi for example, with a CAP and a Collar).

My guess is too many of the retailers have too much debt, and are operating on outmoded business models, which will result in a polarisation of BIg Box retailing and smaller niche. I think the high street needs to be allowed to fail, before the rental pricing, as set by new lease contracts, will revert to a more commercially viable level.

Share this post


Link to post
Share on other sites

Nothing prevents a retailer buying it's own premises; in fact some do (such as ASDA). The principle reason they do not is retailers require a higher return on equity than that provided by the implied yield a purchase would reflect (say 5-6% on average for a good(ish) high street.

Where the model can fail, is upward only rent reviews. As competition for stores in good locations (and in better times) can lead to the 'best' (read most profitable models) able to pay higher rents, GAP used to do this, but before so did the Phone shops, coffee shops and opticians. This sets rental evidence which can he applied to comparable locations - not much help if you are a Piano shop.

Once again, retailers can protect themselves from this by buying premises; or by agreeing a fixed programme of rental changes (set to RPi for example, with a CAP and a Collar).

My guess is too many of the retailers have too much debt, and are operating on outmoded business models, which will result in a polarisation of BIg Box retailing and smaller niche. I think the high street needs to be allowed to fail, before the rental pricing, as set by new lease contracts, will revert to a more commercially viable level.

Why buy when prices are falling?....why buy when interest rates are zero and the only way is up?

.......Don't buy today....rent at the right price...holding your cards to your chest. ;)

Share this post


Link to post
Share on other sites

I don't know how Austin Reed make any money at all. I keep seeing coats for £75, reduced from £300. :huh:

Made in China and shipped over for pennies, say £10. Sell this season's stuff for 300, last season's for 75. That probably also answers the rent question.

Share this post


Link to post
Share on other sites

Sadly ,many landlords prefer to sit in empty shops rather than let them out at lower rents. Indeed, I know at least one small retailer closing not due to lack of trade but exorbitant rent increases. Needless to say the UK tax system encourages this madness but supply side reforms in this area rather than the labour market are curiously absent from Osbornes plans. But then he and most if the current government just like its Nu Lab predecessors are devoted to propping up the rentier model. Protecting yield from rents is seemingly more important than profits from production.

Actually this situation has improved. Osborne did end some of NuLab's special tax breaks for empty commercial property, so hoarding is less attractive for landlords than it was a year ago.

Now if only he'd dare to do the same for residential property :unsure:

Share this post


Link to post
Share on other sites

High streets are facing one of their toughest months, with thousands of shops threatened by closure as rents fall due. Hard-up retailers face a nail-biting three weeks to find cash to pay their landlords after one of their leanest summers on record. After a poor start to the year, consumers have reined in spending even more recently. Experts fear Christmas will be one of the hardest in decades. Figures from accountancy firm RSM Tenon show 861 more retailers joined the critical list in the last six months, which means they may struggle to pay bills. Almost 9,000 retailers are at risk of ‘imminent insolvency’ – an eighth of the sector. Shops selling bulky, expensive items like furniture are most vulnerable. Quarterly rents due at the end of the month could prove the tipping point.

Erm, reference?

Your fourth sentence is one we hear every year.

Share this post


Link to post
Share on other sites

Made in China and shipped over for pennies, say £10. Sell this season's stuff for 300, last season's for 75. That probably also answers the rent question.

So what then happens when our pound is worth less and the Chinese want the finer things in life that cost more?....why can't we make it, provide it, sell it and profit, gain and expand from it?

Share this post


Link to post
Share on other sites

If the landlords refuse to charge an affordable living rent...those that thought they needed a landlord will find or be forced to find another way of earning a living....where there is a way there is a will. ;)

This is why it's important to keep talking 'recovery' . . . so retailers will hold out during the um . . . downturn whatever.

There will be a tipping point, because many products are price-sensitive and overheads are certainly not at chinese costs.

Scottish Herald had a note the other day about 1 in 11 shops now empty and rising. (That's not as bad as many areas in Northern UK.)

It might have been possible for some to hold out, but I think inflation is now a big factor driving down purchases.

Share this post


Link to post
Share on other sites

This is why it's important to keep talking 'recovery' . . . so retailers will hold out during the um . . . downturn whatever.

There will be a tipping point, because many products are price-sensitive and overheads are certainly not at chinese costs.

Scottish Herald had a note the other day about 1 in 11 shops now empty and rising. (That's not as bad as many areas in Northern UK.)

It might have been possible for some to hold out, but I think inflation is now a big factor driving down purchases.

So is it not in the government of the day best interest to keep the small businesses, the low and medium paid working people contented, rather than concentrating on the big top knob tax avoiders and evaders appeased....those in the majority have a bigger say and the apathetic minority is slowly becoming the aware majority. ;)

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 338 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.