The ‘unintended consequences’ of High Street Rental Auction powers given to local councils must be considered by the UK Government, the NAEA Propertymark Commercial Advisory Panel has warned.

The Ministry of Housing, Communities, and Local Government (MHLCG) has confirmed that more vacant shops and other empty premises will be transformed as councils use their new powers to revive high streets throughout England, which is part of the UK Government’s growth mission.

High Street Rental Auctions powers, which provide local councils the power to auction off leases for commercial properties that have been vacant for a considerable period, will be implemented by eight more local councils that have committed to this programme.

Councils include Barnsley Metropolitan Borough Council, Broxtowe Borough Council, Camden London Borough Council, Hillingdon London Borough Council, Lichfield District Council, North Northamptonshire Council, North Somerset Council and Westminster City Council.

EARLY ADOPTERS

This brings the total number of councils signed up to the programme to 11, as Bassetlaw, Darlington and Mansfield councils became Early Adopters in November to set an example to other councils.

Propertymark supports the scheme but when the professional body responded to the public consultation on the measures back in July 2023 they recommended that local authorities should have the power to design and implement High Street Rental Auctions as they see fit depending on their area.

It also encouraged councils to guarantee that properties subject to a High Street Rental Auction have a reserve price to safeguard market prices and to ensure the price covers the costs of any mortgages.

UNINTENDED CONSEQUENCES

Michael Sears, NAEA Propertymark Commercial Advisory Panel member, says: “The UK Government needs to consider the main unintended consequence of these measures.

“In areas where there are high numbers of vacancies, by auctioning off property where supply outstrips demand, this could only result in rents being driven down further, and investment in town centres where returns would be low would cease. The effect of this would be negative towards regeneration and inward investment.

“When a commercial rent review is due, are the results of high street auctions going to be used as evidence of market price by tenants’ surveyors? In which case commercial property investment and lending on commercial property could become problematic, given the heightened risk. There needs to be protections in place to avoid this downward spiral.”

HIGH STREET RENTAL AUCTIONS: HOW CAN THIS SOLVE HIGH STREET PROBLEMS?

It is right that the regeneration of our high street is a priority for the government: the vitality of a local high street has a significant knock-on impact on the broader economic and social value of our towns and cities.

But great minds from across retail, planning and regeneration have attempted to find a solution to the ‘perfect storm’ battering so many of our high streets and the failure to do so suggest that the solution is far from simple.

The suggestion by the government that ‘disengaged landlords’ are ‘sitting on empty properties’ highlights the complexity of property investment. No landlord wants their investment to remain vacant while maintenance bills mount or the property falls into disrepair: most would welcome any alternative.

SUPPLY AND DEMAND

But, as is demonstrated by the number of multi nationals, and independents closing on the high street and the fact that one in seven high street units is empty, the state of the high street is ultimately at the mercy of supply and demand factors.

Boyer has first-hand experience of this and we are currently working for a number of clients regarding restaurants, pubs, coffee shops and general retail. We are aware that there are detailed considerations which need to be taken into account before any investment is made.

The previous government’s introduction of Class E was a bold move, using considerable deregulation of the planning system to encourage high street regeneration, allow a wider choice and support local demand. Whilst there has been some success in this and it inevitably increases the flexible use, many properties remain empty.

CHANGING FACTORS

It seems unlikely, therefore, given the flexibility of change of use and the considerable marketing that is invested in such properties, that an auction could resolve their fortunes. There are many broad, complex and ever-changing factors at play the government’s priority for high street regeneration must be to address them.

The ethos of ‘right to rent’ is a throw-back to Localism – itself an ineffective gesture to offer power to local communities which for a plethora of reasons failed to deliver.

I would question why a building which had been marketed for many months would attract interest at auction; whether landlords’ properties should be removed from their possession (albeit temporarily) when they have invested in both the bricks and mortar and the management and marketing of the unit, and how the new tenants would succeed where the professional landlord has failed.

Furthermore, do local authorities have the resources to do so, in terms of skills and finances? The perilous state of local authority finances would suggest not.

Simon Barry is Director of Boyer (part of Leaders Romans Group)