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Sisyphus

Passing Your Costs On To Your Tenants

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Guest Baffled_by_it_all

I live on that street and in recent years I've seen most of the shops at that end close down. Most of them are businesses that have been there a while. We've recently lost the local bike shop. Nearly all of them are vacant now.

I had a suspicion it was due to higher rents.

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Quite a few shops locally are empty, and according to the local paper most of them closed due to insanely high rents. One has been replaced by a bookie though, which will keep the chavs happy.

Even my favorite chinese takeaway got knocked down a couple of years back to build more crappy flats.

Of course in the long run this was probably inevitable anyway, because a retail store is becoming a liability when your competitors are web-based and can operate in areas where rents are low.

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LOL - When I was a youngster my employer had his rent trebled. He said he was leaving and wished them luck in finding a tenant. Apparently the landlord had done it to all of his tenants and they all said they were leaving so the landlord changed his mind. The tenants got wind of each other and negotiated a rent decrease or they all walked. :lol:

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This is rising/bubble market thinking. One property goes for a certain price, either for rent or purchase, and then all other properties expect to get the same or more. The estate agents quoted in the article mentioned that the asking rent for the property was in line with rents achieved for other shops in the parade. I'm sure it'll take a long void before the landlords start thinking that perhaps they'd make more money if someone rented the shops.

Billy Shears

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To be fair, the smart people must have realised that retail is dying and got out by now: so it's not surprising that the idiots who bought from them are acting like idiots.

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Often we hear about landlords talking about passing on increasing costs to their tenants through higher rents.

umm... this is what happens when the tenants don't agree.

'Sky high' rents leave shops standing empty

always room for a few more Estate Agents' offices I suppose. :lol:

I'm glad you chose to point out that tenants have a choice of either paying the higher rent of moving out.

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I'm glad you chose to point out that tenants have a choice of either paying the higher rent of moving out.

refreshing to see that you get the point

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I'm glad you chose to point out that tenants have a choice of either paying the higher rent of moving out.

....and in doing so putting downward pressure on the higher rent. Depending on the magnitude of that pressure, the higher rent may be merely a paper entity, and never come to pass in reality. The rent may in fact be pushed back down to the original level, or perhaps lower, before it is actually ever paid again by a tennant.

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I live on that street and in recent years I've seen most of the shops at that end close down. Most of them are businesses that have been there a while. We've recently lost the local bike shop. Nearly all of them are vacant now.

I had a suspicion it was due to higher rents.

I think Gemini photography have moved down the road to to East Finchley - I expect their new rent is cheaper.

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I think Gemini photography have moved down the road to to East Finchley - I expect their new rent is cheaper.

It would be interesting if you dropped into the shop, mentioned the article, and asked if rents were the reason for the move.

Billy Shears

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This is rising/bubble market thinking. One property goes for a certain price, either for rent or purchase, and then all other properties expect to get the same or more. The estate agents quoted in the article mentioned that the asking rent for the property was in line with rents achieved for other shops in the parade. I'm sure it'll take a long void before the landlords start thinking that perhaps they'd make more money if someone rented the shops.

Billy Shears

Billy the high street is changing - the only shops that can afford to rent at high prices are those that have high profit margins and low wage bills

A good client of mine is a butcher we respected and succesful (40 shops) but they are being squeezed out of the high street locations by non traditional businesses - heres how

Butchers shop employs 1 manager 1 assistant 2 senior butchers 2 junior and 2 apprentices together with 2 full time ladies and 4-6 part time to include Saturdays

Profit margin low due to competition from Tesco wage bill circa £200k PA

Next door is a card shop they employ 1 manager (not skilled) 1 or 2 ft assisatnts and 1 or 2 PT assistants

Profit margin high mark up between 75 and 90% wage bill circa £50k PA

Traditional businesses have no chance in the cities that will spread to rural areas very quickly

Another fine mess they've gotten us into

CS

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....and in doing so putting downward pressure on the higher rent. Depending on the magnitude of that pressure, the higher rent may be merely a paper entity, and never come to pass in reality. The rent may in fact be pushed back down to the original level, or perhaps lower, before it is actually ever paid again by a tennant.

And in doing so often going to a higher rent by stealth, not realising the previous tenants rent in the new place they move to......

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Billy the high street is changing - the only shops that can afford to rent at high prices are those that have high profit margins and low wage bills

A good client of mine is a butcher we respected and succesful (40 shops) but they are being squeezed out of the high street locations by non traditional businesses - heres how

Butchers shop employs 1 manager 1 assistant 2 senior butchers 2 junior and 2 apprentices together with 2 full time ladies and 4-6 part time to include Saturdays

Profit margin low due to competition from Tesco wage bill circa £200k PA

Next door is a card shop they employ 1 manager (not skilled) 1 or 2 ft assisatnts and 1 or 2 PT assistants

Profit margin high mark up between 75 and 90% wage bill circa £50k PA

Traditional businesses have no chance in the cities that will spread to rural areas very quickly

Another fine mess they've gotten us into

CS

I wasn't saying that it was a logical way to think, I was just theorising as to why the landlords were asking such high rents. Given that, as you point out, fundamentals are moving away from shops being able to pay high rents, rising market/bubble thinking is even less logical than it was in the past.

As an example, there are a couple of houses very near to me that are on at high prices. This one:

http://www.rightmove.co.uk/viewdetails-942...pa_n=1&tr_t=buy

is on at 152K for a small semi. This one:

http://www.rightmove.co.uk/viewdetails-118...pa_n=2&tr_t=buy

was on for 137K, now on for 132K with multiple agents. In either case, it's possible to get a larger, better, semi, in a better road for the same or less cash. I've been wondering why they were asking so much (though the owner of the latter property appears to be wakiing up). Turns out that a semi in pretty much the same road went for 143K.

http://www.nethouseprices.com/index.php?co...ge=&house_type=

So that may be the reason why. One house goes for an unrepresentative price, and others then want the same or more. The 137K -> 132K house is a terraced ("link detached") house. But it seems that once one high price is achieved, others expect the same.

Billy Shears

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I wasn't saying that it was a logical way to think, I was just theorising as to why the landlords were asking such high rents. Given that, as you point out, fundamentals are moving away from shops being able to pay high rents, rising market/bubble thinking is even less logical than it was in the past.

As an example, there are a couple of houses very near to me that are on at high prices. This one:

http://www.rightmove.co.uk/viewdetails-942...pa_n=1&tr_t=buy

is on at 152K for a small semi. This one:

http://www.rightmove.co.uk/viewdetails-118...pa_n=2&tr_t=buy

was on for 137K, now on for 132K with multiple agents. In either case, it's possible to get a larger, better, semi, in a better road for the same or less cash. I've been wondering why they were asking so much (though the owner of the latter property appears to be wakiing up). Turns out that a semi in pretty much the same road went for 143K.

http://www.nethouseprices.com/index.php?co...ge=&house_type=

So that may be the reason why. One house goes for an unrepresentative price, and others then want the same or more. The 137K -> 132K house is a terraced ("link detached") house. But it seems that once one high price is achieved, others expect the same.

Billy Shears

I did not wish to appear that I disagreed with you - just pointing out a scenario that is set to repeat itself the business in question was succesful so was not under pressure but there are many that are not so luck

In private housing the opposite occurs the succesful will sell at the right price as they have minimal debts and realistic expectations - whereas the loonies that have swallowed the spin mewed and credit carded themselves up to the max - firstly they cannot sell cheap as if they wish to move onwards and upwards and secondly refuse to accept that the market is kn*ckered 'cos the VI's are feeding them with false info

I expect to see more reductions soon

CS

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always room for a few more Estate Agents' offices I suppose.

Charity shops as well. They are below Estate Agents on my contempt list.

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I'm glad you chose to point out that tenants have a choice of either paying the higher rent of moving out.

Moving out to a cheaper place. :rolleyes:

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When you start noticing voids in brand new central shopping centres you know that the "high st" is in trouble.

There's so much commercial proprty on the market and empty for very long periods... somthing has got to give.

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Charity shops as well. They are below Estate Agents on my contempt list.

Charity shops don't have to pay Business rates as far as I am aware, they also don't pay staff as most are volunteers - what chance does small business have?

I suppose that is why so many are on e-bay

CS

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I live on that street and in recent years I've seen most of the shops at that end close down. Most of them are businesses that have been there a while. We've recently lost the local bike shop. Nearly all of them are vacant now.

I had a suspicion it was due to higher rents.

we're virtual neighbours! I think there are a few N10ers and N6ers on the forum.

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Guest Baffled_by_it_all

Hardly much of a surprise. Prices around here are pretty ridiculous. Having said that I'm having a real hard time finding a flatmate for the place I'm renting at £500pcm. At this rate I'm going to sack the flat and move in with a mate in Stoke Newington. Weird...

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And in doing so often going to a higher rent by stealth, not realising the previous tenants rent in the new place they move to......

No. The model you're describing is one in which people who want to escape a rent rise do so by moving to a non-equivalent, lower quality residence, which used to have a rent lower than the new higher one which it is now charging, but which is lower than the previous property rented.

That's equivalent to the cost of a business service, or a consumer product suddenly rising, and the result being that the customer cuts costs by opting for an inferior, or lower quality product which is cheaper, but happens also to have risen in cost. That's only going to happen if the market will bear it. It may be that customers will shift instead to a different but equivalent quality product or service, offered at the old low price, on the basis of the manufacturer or service provider being able to absorb the new costs through lower costs in other areas, or perhaps in reduced profits which they are prepared to tolerate given that their competitors, who tried to pass on the price rise, are now out of business due to sudden drop in customers prepared to pay.

We've been over this many times before. It's a tug-of-economic-forces, which may see the consumer or the provider, or perhaps both, suffering a reduction in their profits or an increase in their costs. It isn't one way. There are always people ready to try and take advantage of price hikes in a market by holding their prices, perhaps at their own expense, to win new market share, and hence perhaps by economy of scale afford better working practices, tools, skills, etc. which allow a new reduction in their costs to cancel the previous rise in input costs.

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  • 301 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%



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