The current government has introduced the High Street Rental Auctions scheme, to tackle vacant high-street buildings and give local authorities more opportunities to create thriving towns. The Levelling Up initiative will kick-start as early as this summer with a £2 million support pot made available to support local authorities. However, with the general election fast approaching will another party have better ideas?
Following the announcement, Simon Davis, CEO of property intelligence platform Nimbus, assessed what this means for the market and if the scheme will have the desired effect in reality, or shift the problems elsewhere.
“On the face of it, the High Street Rental Auctions scheme is a positive move by local authorities to revitalise the high street. By giving more power to local authorities who know their areas best, we can expect more effective decision-making and improvements to the high street on a local level. There are many challenges with high-street shop vacancies, including decreased footfall, unemployment and in the long-term, antisocial behaviour, which the scheme looks to combat by getting them re-let in a timely manner.
“However, the practicalities of the scheme do paint another picture. While solving the primary issue of preventing gaps in the town centres or even ghost towns, there are several potential knock-on effects, which could end up having an equal or greater impact.
“First, is the formation of an artificial market that’s undesirable to investors. Auctioning property leases with no minimum reserve fee or minimum rent means it could be secured for lower than market rate price, simply because people didn’t turn up. This is not only unfair for others letting at higher rates in the same area, but it could create rental comparables much lower than the overall market rate value in the area.
“A further consequence is that rateable values, (a value that is primarily derived from the rental value) would be significantly lowered. This would mean significantly lower commercial rates income for the local authorities who are already struggling to balance their books.
“If a local authority acts in this way, it could create an artificial market that could actually put potential investors off an area and prevent them from refurbishing the local property assets.
“For example, if you want to secure a property that’s been vacant for less than a year, why wouldn’t you wait even longer to see if you could get a reduced rate at auction? Local authorities may find more properties vacant for a year or longer as occupiers wait for the right opportunity, which would hinder, not speed up, the re-letting of the high street.
“On the face of it, the idea is laudable in terms of solving the challenge of ‘ghost towns’. However, more thought needs to be given to the wider implications of the scheme and the impact on the already fragile equilibrium of local high streets and surrounding residential properties. It would be good to see those in the industry consulted on the initial proposal and some of the outstanding questions answered before it’s rolled out UK-wide.”