Local interest soapbox borefest: vacant shops
302 wordsThis story from the Leamington Courier, about vacant shops in Leamington got my attention. Bath Street is on our walk into the town centre, and the vacant commercial properties are conspicuous and long-standing. Regent Street ought to be a high-end commercial street, and the the vacant properties on the East end do let it down. There are also empty shops on Clemens St, less central to town, but intended to be a commercial zone.
Some of the reasoning in the article seems wrong-headed though. One shopkeeper things landlords should be penalised for not letting their shops. Surely, they are already penalised in that they are forefeiting an income for the property?
Another tradesman blames supermarkets and the Internet. While these might provide competition for smaller shops, people still enjoy poking around at physical objects: bricks and mortar shopping is not dead by any means.
“Competition from coffee shops” is blamed. I’m afraid I’m unable to follow that particular argument. Surely coffee shops help, by attracting people to town and taking up property?
To me this appears to be a market driven economy with some sort of spanner in the works. Surely, if the rent and bills were set at an appropriate level, then tenants would be forthcoming? Either the rents are set too high, or the true value of the properties is not apparent to potential tenants.
It’s a well known part of the theory of market economics that markets self-balance only when you have a perfect flow of information — something you never get in real life because of delays, because of propogation delays, secrecy, spin etc. When a market isn’t working, you have to regulate to compensate, or unblock the information flow that’s causing the problem.
I can only speculate about the causes for this one. Maybe the estate agents are giving inappropriately high valuations?
February 28th, 2007 at 16:14
I can understand supermarkets being a big problem. You can get books, CDs, DVDs, stationery, home electrical goods, newspapers and magazines, cards - almost everything. They just cream off the top end of the market and depress prices for products, as they have with CDs and books. That makes it much harder for specialists to survive - a bookshop needs to be able to sell popular books competitively to get people through the doors to buy the specialist books.
Talk of forcing landlords to rent properties and fixing the rent at the right price doesn’t reflect the fact that the properties carry a cost, probably including a mortgage cost. Problems occur when the market value of the rent is less than the cost of servicing it. Many landlords will reason it doesn’t make sense to rent it out at a loss, and will prefer to keep it until rents recover or they can sell the property on.
The problem could also be that there just aren’t any shopkeepers who want to take a gamble on a shop in a depressed part of town. There’s a downward spiral at play here, but it wouldn’t be my first choice of a place to open a new business and big brands won’t go into a dead street either.
March 1st, 2007 at 13:11
But surely renting at a loss is better than maintaining a vacant property at a greater loss?
In one case, we are talking about a depressed part of town, but Regent St. is a premium location.
March 14th, 2007 at 17:33
> But surely renting at a loss is better than maintaining a vacant property at a greater loss?
I think the most likely reason for keeping it empty is the term of rental contracts. You’re more likely to want to keep the place empty, so you can rent it out at profit or at cost or even sell it on at any time, than commit to a year of making a loss on the property starting now. The past is no indication of future performance.
Also, tenants cause additional hassle and expense. Normally, that’s covered by the rent profit. But if you’re making a loss on renting the place out, it’s a double whammy to have to meet landlord obligations to fix things when they go wrong. I don’t know what the marginal cost of having a tenant in a property is, but it might tip the balance and make it more hassle than it’s worth to let out properties below the market rate.
Also, a lot of landlords have the long term goal of recouping their investment on sale, so as long as the property price keeps rising, they’re okay. They’re not making as much profit as they would renting the place out, but they’re not making a cash loss over the longer term.
I think we’re not used to seeing vacant properties because so many of them get covered up by short-lease charities shops in a deal with the local council. There are probably many more ‘loss making’ properties around than we realise.