Rents Poised to Fall: Who Benefits?

October 31 2017
IN PICTURE: Clumber Street, Nottingham.  Picture taken on Good Friday, 18th April 2014.
PHOTOGRAPHER: MARK FEAR

The Times They Are A Changin’

  • Landlords have profited from the boom in casual dining.
  • Low interest rates, deep pockets, and lots of vacant A1 units have encouraged growth.
  • Supply is reaching a tipping point, particularly in London; the market is saturated.
  • Interest rates, input costs, wages, competition, etc. have led operators to trim their opening pipelines and even dump units.
  • For the first time in years, landlords are struggling to fill space.

A Word on MRO and Tenanted Pubs:

  • Pubs who have applied for a pubs code review might find themselves bogged down in a lengthy, complex, and expensive process.
  • The process’ muted take-up might reflect its ability to bankrupt a pub business.
  • Or could it be tenants are realising that life is not quite so bad under the tied model as had previously been made out?
  • Either way, a year on since MRO rocked the tenanted pub market, the landlord is untroubled.

A More Residential Town Centre?

  • The High Street is another matter. Retail’s centre of gravity is shifting to online. A meaningful amount of physical shops are outdated.
  • While alternative leisure pursuits could fill up some units, this is akin to putting a band-aid on a bullet wound.
    • It’s a nice gesture, but you’ve still been shot in the arm.
  • House-building continues to lag targets; residential conversion of High Street retail units sounds like the most likely option.
  • This shift will take years to play out, however.
  • In the meantime, declining rents mark an opportunity for canny operators to selectively acquire sites in deals that can go some way to mitigating softer demand.