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Landlords claim rents have fallen by a third

Landlords have claimed shop rents have fallen by a third in 20 years in a study of retail tenancies as part of Mary Portas’ review of the high street.

According to independent Investment Property Databank (IPD) data landlords are being more flexible with lease terms and high street shop rents have fallen by a third over the past 20 years in real terms.

Prime Minister David Cameron appointed retail guru Portas to lead a government review into the future of the high street and as part of her review Portas will look at the relationship between landlords and occupiers plus trends in leases.

The IPD study, which looked at 47,708 retail tenancies shows that the average lease length is 5.7 years with 34% of new leases having a break clause, a rise from 3.9% in 1999. There has been a “significant” increase in break clauses as retailers look to hedge against economic uncertainty.

Separate IPD data showed that while inflation has risen 94% since 1989 shop rents have only risen by 24%, and so in real terms rents have fallen by 37%.

Since 1989 rental growth for standard shops has been 51% in Central London, 24% in the rest of London, 10% in the rest of the South East and Eastern regions and 25% in the rest of the UK.

Liz Peace, chief executive of the British Property Federation, said: “The issues facing our high streets are extremely complex with recession, structural changes caused by the internet and consumer preference all in play. In such times of change it is important that leases adapt.”

“Today’s data clearly shows landlords are increasingly flexible and retail property leases continue to adjust to economic conditions, with leases that are shorter, offering breaks and substantial rent-free periods to help new shops to get off the ground.”

Peace added that while rents in prime retail areas have increased many high street shops have rents that are “substantially lower” than in 1989.

She said: “Rather like our high streets, however, the property industry thrives on its variety, and ability to raise investment. There is no one size lease, but a mix that caters for our industry’s office, industrial and retail customers.”

Readers' comments (3)

  • The issue, therefore, has to be why have business rates similarly not fallen? After all, the rateable value is meant to reflect the level of rent passing between a tenant and landlord. It would be interesting, therefore, for the study to analyise the increase in rateable values of the properties within the surveyor over the same period.

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  • Rates, NNDR, Business Rates - call them what you will - they are a killer!!! And fail to pay them at your peril. A lot of landlords understand the "ups and downs" of business life but expect the same from Councils, forget it!! Most seem to outsource their collection of NNDR to businesses that have only one objective, get paid before everyone else!!

    Equally, for every business, NNDR (Business Rates) are a significant proportion of the total cost of running a business and there has never been a "quid pro quo" as to how that money is spent locally. Surely those who pay NNDR should have a vote as to how their council spends their money? Taxation without Representation as far as I can see!!

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  • Rent and Rates are a killer, but these facts are known prior to a business moving in, so it's an easy excuse to use when times are hard or more often than not, when a business is being run badly.

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