Thursday 5 April 2012

More Portas woes

Portas review comes under fire again. Still, Mary's used to it. Every time she makes a show its attacked by someone. This time its because the allocation. The £10 million Government funded plan to revitalise the UK high street has come under fire after it emerged that one of the areas allocated £100,000 had just two vacant stores in its main town centre. This can only be an error though, surely?

Whilst its good to splash some cash as this report says In Nottingham, with 428 empty shops, the £100,000 grant is worth £233.64 per vacant store.

£233.64 is worth about 1 weeks rent. On LBC earlier there was a woman complaining that her shop has just received an 80% rent rise demand. And the rates bill, up to 40% of rental value. - She expected it would add £22,000 to her bills.

Her shop was an "ethereal holistic" shop . I suspect that means healing crystal and dreamcatchers. This is a shop that I wouldn't set foot in a billion years. But Mrs Q would be in there for ages. If a 'new' generation of smaller, more local shops, for local people plan is to be achieved then messing about with free parking days isn't going to be enough. No independent can stand an 80% rent rise. I've seen hundreds of shops turn from healthy profit to deadbeat loss makers after a rent review. Landlord doesn't care. They'll get a Starbucks instead.
So in the end all high streets become the same as they are all big buck chain stores. And why visit a crappy high street, if there's a bigger, better one, or shopping mall not too far away?

In some towns, Glastonbury, Canterbury,for instance, these New Age stores become a draw for the student/tree hugging market. That gives a USP to the high street and a reason to visit. And its all about footfall. A newsagents in a busy, aging, dippy hippy, street is still better off than one in an empty ex-chain street.

I am appalled at the lack of new businesses in the major high streets. No independent hairdressers. No hardware stores. Pie shops. Delis. Beauty shops. 50+ fashion. Childrens clothes stores. Baby - maternity shops. Teenage bag shops. Funky Accessory. Homewares.
Model shops. Computer sales and repair. Electronics. Independent TV and High fi. Proper sporting goods stores. And so on. You find all these shops still in small towns and villages where rents are low and rates relief high.

Modern business people are selling online. They set up at home and if all goes well they expand into a unit on a trading estate or farm building somewhere. But if these same people, selling.. ?? vintage sweets of yesteryear on line, could rent an outlet on a high street, as cheaply as they could a storage unit, surely many would?

Instead of having stock on shelves, they have stock on shelves, in plain view, that a passing public can purchase. This is an enhancement to their online presence. The shop sales, assuming even £50 sales a day, which is a truly terrible figure, still pays for the lights, heat, insurance, that would normally be funded from online sales. Sure, its more hassle for a sole trader. But it could , and should, be profitable enough to be worthwhile. And it regenerates the high street with plenty of one off, niche shops, that are currently existing in out of the way places. The inspirational , mind, body, spirit, silver jewellery seller can stay in business instead of becoming yet another Tesco extra.

Its rent and rates that are the real key.
Everything else is tinkering.


roym said...

cant help but feel the Amazon story today is also part of this. Essentially an offshore entity is hollowing out our retail sector, with no benefit to the exchequer.

Botogol said...

the economics of this don't make sense.

our high streets are dying - but landlords are acheiving 80% rent increases ?? it doesn't make sense - the supply of high street shops is very inelastic, if the market price is going up, it must be because demand for the space is increasing, people want to be there.

If people don't want to be on the high street, then rents would fall, and if rents didn't fall we'd see voids.

One notable thing distorting the market though - charity shops. BQ talks us through how the finances for charity shops works. The rates disappear, right, and that benefot is shared between landlord and tenenat. But how much money is the rates? does it really make so much difference that it explains streets simply full of chariy shops, or is there more to it?

Bill Quango MP said...

Roym - Thats a big part of it. The VAT loophole importing through the non-EU channel islands too. That has only just been closed but it was a major driver in pushing down online prices without harming profitability. Only the chancellor lost out. Wonder why he let it go for 10 years?

Botogol.- Charities don't pay rates {within certain parameters.} The rents are low too as the shops probably have a notice to quit of a few weeks in their lease.
Charities often have fuel for vehicles, power for lighting etc at zero% VAT.
There are a raft of VAT exemptions designed to help medical and research charities. Such as no VAT on computer equipment. I don't know if the high street charity shop can take advantage of that.

I was surprised a few years back to discover a charity shop selling new items. The same items that BQ industries sell. Sourced from China/far east. They were selling at about a 20% discount to us. probably because of their many exemptions and their staffing costs of just 10% of us. -oh, and they pay little tax.

So..high street full of charity shops. They can't go bust.They aren't fussed about location. They don't want anything from the landlord.

Charity shops are the new estate agents. The only good news {often ignored by neighbouring traders} is that they help keep rents down.
But most high street traders still resent them.

Bill Quango MP said...

Botogol - Rates are about 30-40% of rentable value,every 5 years, as assessed by the government.

At present there is a big increase in rates as premises were valued at the very top of the boom in 2007.

The damage the rates does is that the VALUE of a building {owned by a landlord} goes up. Maybe due to a housing boom or a shortage.
The tennant receives no benefit from this. But their rents and rates will skyrocket.

In a recession,as now, the rents fall. Some companies are paying next to zero rents.

If councils are serious about regeneration see what the shopping malls do when they start.

These centres are in it for the long haul. They need to get established, so they work at it.
They seek out anchor stores and offer a fantastic deal - So M+S - John Lewis get a sweet opening deal.
-They offer rent free deals - 2 years, 3 years.
- They offer limited rent rises -5% -20% etc.
- They offer to fix service charges for 'x' years.
They agree to promote and advertise their centre on radio/TV and local press etc.
They will offer a free shopfitting.
Sometimes, even partial rates paid.
If they own their own car parks they offer time back to shoppers.
They offer vouchers for free meals/coffee
- late nights.
- Market days
- street theater/
floor space for a short term advertising, such as a cadbury's easter egg hunt-F1 on SKY TV with racing car simulators and so on.

They only do it when they have to of course. When they need to.
Shopping malls are under a management committee. its easier for them to insist upon opening times/window displays/types of business/ number of same shops etc etc in their leases.

High streets? That's part of what Portas is advocating. Someone to take charge. Unfortunately it seems that the chosen vehicle is the council.
History tells us that these are not the innovating,hard working, instant decision, cost cutting, marketing, fast reacting,go getters that will be required.

i swear in my local high street there is an empty shop that is staffed by some sort of work experience program, that is all about explaining recycling to the public. ???

What cretin thought that would do any good at all except to use up the training/renewables budget?

Watch this space {to let}!

on and on and onanism said...

How many times must it be said?

Land tax, land tax, land tax.

All the rest is tinkering round the edges.

Electro-Kevin said...

One of my friend's small restaurants costs 20k a month to run.

andrew said...

underneath it all arent rents (which drive rates etc) driven by the value of the shop (at the time of purchase) and in the uk commercial property outside some hotspots in london the owner needs a certain yield to cover the mortgage and that price is too high for many shops to be run profitably.
my solution
a - a fall in commercial property price
b - a good dose of inflation

James Higham said...

Her shop was an "ethereal holistic" shop . I suspect that means healing crystal and dreamcatchers. This is a shop that I wouldn't set foot in a billion years. But Mrs Q would be in there for ages.

I see you behind the counter in a cawl, Bill.