Auctioning off the High Street – regeneration or political gimmick?

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Retail landlords could soon be forced by local authorities to rent out empty premises, or face authorities stepping into their shoes and doing it for them via compulsory rent auctions, according to the proposed Levelling Up and Regeneration Bill.

Matthew Jones, Senior Associate, in the Commercial Property team at BPE Solicitors looks at the future of our high streets…

The move by the government, announced in the Queen’s Speech in May, is a bold one. Is this good news for the high street?

Possibly. It could mean that retail units that have been empty for months – or even years, could quickly fill up with new tenants, adding vibrancy and footfall to our beleaguered high streets.

It would certainly force the hands of absentee landlords, or encourage those disinterested ones sitting on large amounts of vacant property to become a lot more proactive in finding tenants.

The bill will give local authorities the right to sign a lease with all the power of the landlord.

But looking at this apparent “quick fix” from a more strategic view it might not be the solution to returning our high streets to their former glory. A local authority, in their enthusiasm to get vacant premises filled, might tie the property up for five years on a low rent in a compulsory rent auction to a tenant who might not be right for the longer term.

The British Property Federation is also concerned. Responding to the Levelling Up and Regeneration Bill, its Chief Executive, Melanie Leech, said: “We fully support Government’s ambitions to drive local growth and revitalise town centres but political gimmicks such as compulsory rent auctions are not the solution, and will deter – rather than encourage – investment into the areas where it is most needed.

 She added: “No property owner wants their premises to be empty. In our experience, property owners are willing to do zero-rent deals to avoid boarded up shopfronts, but the burden of business rates and other occupational costs mean it is still unviable for many small and independent businesses to trade from town centre premises.”

 What draws people to town centres are big brand names, a safe and vibrant public space, and plenty of activity. But big retail brands won’t take space if business rates and rent remain so high.

 Getting all stakeholders around a table is key. Much can be achieved by investors, local authorities, retail brands and the community working out a longer-term plan for their high street, which could include investment in public realm, local parking and transport, and a programme of activity centred around the town. Cheltenham’s Jazz, Literary, Science and Music festivals annually bring tens of thousands of people into the town centre.

A rates mitigation scheme in addition to stakeholder engagement would be far better than offering commercial rent auctions to retailers who might be looking for short-term gain rather than a longer-term commitment.

The British Property Federation suggests the creation of Town Centre Investment Zones to accelerate regeneration, where local stakeholders could benefit from various powers and incentives to enhance private investment potential and expedite change.

With the Local Data Company quoting 14.5 per cent of retail and leisure high street properties vacant in June 2021, there is no doubt that something needs to be done to regenerate the high street for modern purposes.

Rental auctions may solve the issue of absentee landlords, but from experience more needs to be done to incentivise investment in the heart of our towns.

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