The first 3 months of 2013 are just about to pass and unfortunately it has only been bad news from the commercial property market and the retail industry.
Let’s take a quick look at what has happened since the start of the year for commercial property and the retail sector which will help us answer the question – who buys high street shops?
The following announcements have been made this year: Thomas Cook to close 195 shops in the UK; Tesco to axe 800 jobs in Harlow; 250 year old carpet maker Axminster went into administration; HMV to close another 37 stores; Republic, who had 120 UK shops, went into administration; Barclays announced 4,000 job losses; Store Twenty One, previously QS, to close 46 UK shops; 8 Co-op department stores in the Midlands to close; HMV, Jessops and Blockbuster went into administration; and Dreams collapses. All this doesn’t make good/positive reading and isn’t very encouraging for investors who are looking at buying high street shops.
What is certain is that the retail and commercial property markets are both still experiencing turbulent times and the situation with both is likely to stay like this for some time to come. As a result of this, buyers are being very cautious and either steering clear of buying high street shops or purchasing shops at very low prices to reflect the potential risk. Prices which people pay for commercial property are mainly based on the income which the property can generate and the likelihood of that income being paid. Since rents are falling, and many retailers/tenants are unable to pay their rents, the risk attached to buying shops is far greater than it has ever been. Therefore, prices are lower than they have ever been and are predicted to keep falling for at least another 12-18 months. After that, who knows – although no-one is predicting a quick recover.
In summary, not many people are buying high street shops but those who are brave enough to invest in this market are buying at rock bottom prices.
Commercial property agents still seem to be over-valuing property and giving their clients false hope.
We receive hundreds of calls each month from people who tell us that they have had their properties valued by commercial property agents who 18 months later, have failed to find a buyer. When we ask them why they think this is the case, they tell us that the valuation they were given by their commercial property agents was too high.
What we are good at doing at Sell My Commercial Property is giving you our opinion of what we think your property is worth which most of the time is very close to the true market value. We do not do what most commercial property agents do which is to tell you what you want to hear – we tell you the truth.
Commercial property agents are losing a great deal of business by continuing along the path of giving property owners wildly exaggerated expectations of what their properties are worth which ultimately leads to sellers losing time, money and the opportunity to achieve a sale.
If you want to sell your property in London, now is the time to act.
Central London is still experiencing a mini boom although some say this is coming to an end. However, the suburbs are a different story. Some places outside of central London still remain strong whilst others look as if they are balancing on the edge of a cliff. However the market for selling property in London in general still remains quite stable. How long this will last, who knows.
If you want to sell your property outside of central London, and manage to receive an offer which clears your debt and makes you a profit, then that sounds like a good deal to me! What you don’t want to do is to refuse an offer, thinking you can get more, and the market is going to get better, only to discover in the next 6-18 months that the complete opposite has happened.
Investing in commercial property in London has become a real art and it is becoming more difficult to predict where values will be in the future.
If you own commercial property in central London, then you don’t need to worry, for at least another 1-2 years, as values are still rising as a result of the weight of overseas money chasing the short supply of stock. However commercial property outside of central London is a different matter.
If you own commercial property in a good, affluent London suburb, such as Hampstead, Putney and Camden, then again, you will be pretty safe in the foreseeable future. However less salubrious suburbs, such as Wandsworth, Finchley and Tooting, will present more of a risk. In these latter places, as there is less disposable income, property is less desirable to occupiers and investors. There is less general investment in these places and as a result of all of these factors, the future for commercial property is less certain.
People today who are still investing in commercial property in London are mainly interested in mitigating their loss. Therefore location is of paramount importance along with the quality of the tenant/s who occupy the property.
Commercial property buyers have a very good reason to be afraid – after all if your business was to buy and own commercial property where you are relying on your tenants, some of who are retailers, to survive in these difficult times and pay you rent, wouldn’t you be?
Over the past 6 weeks, we have seen the likes of Stead & Simpson, Comet, HMV, Jessops and Blockbuster fall into administration – and they are just the retailers!
Commercial property buyers and investors are treading very carefully indeed. Those who are buying are making very low offers, those to own properties are trying to sell and are happy to accept very low offers and generally very little activity can be seen.
The message is simple – if you own a commercial property, you should be thinking of selling before you too become a victim of this recession which shows no signs of abating.
In the wake of the Jessop’s collapse, experts predict 30,000 jobs could go on the High Street with potentially 45 retailers with 3,500 stores facing closure in 2013.
Experts have blamed poor consumer spending together with the banks refusal to extend retailers overdrafts and credit facilities as a contributing factor.
The typical UK High Street has fallen victim to the worldwide recession which started nearly 5 years ago and things are set to get a lot worse.
Blockbuster UK adds its name to the long list of household names that have entered administration in recent years as struggling families cut down on spending.
The number of High Street chains going bust has increased by almost a fifth in two years, figures released last week showed.
Some 194 stores and chains fell into administration during 2012, compared to 183 in 2011 and 165 during 2010, according to data from Deloitte.On Tuesday, entertainment giant HMV went bust following on from camera retailer Jessops just days earlier.
Last year saw the demise of Comet, La Senza and Clinton Cards, with JJB Sports, Blacks and Game also entering administration. But the number going under in the run-up to Christmas dropped, with 37 chains folding in the final three months of 2012, compared with 42 in the same period in 2011.
DVD and video games rental chain Blockbuster UK has collapsed into administration, putting more than 4,000 jobs at risk and causing panic amongst those who own commercial property let to this chain.
The entertainment retailer became the third major High Street casualty of 2013 after falling demand and online price wars saw photography retailer Jessops go bust last week, followed closely by entertainment stalwart HMV on Tuesday.
The demise of the three high profile retail chains in such a short space of time is a major body blow to the High Street which is already reeling from the administration of Blacks, La Senza, Clinton Cards, JJB Sports, Habitat and Comet last year.
Blockbuster UK, which first opened in 1989, has appointed Deloitte to seek a buyer for all or parts of the business just days after rival HMV hit the rocks.
This is yet another blow to not just the retail industry but also the commercial property market as landlords who own property let to Blockbuster will immediately see their income disappear.
There has always been a myth about ground rents in that people think you can’t go wrong buying them and owners can literally name their price when selling them. Ground rents today are still desirable but many aspects of ground rent investments must be considered very carefully. How much ground rent do the tenants pay, who manages the block, is the management company doing its job properly, are there any rent and service charge arrears, are there any shortfalls for the owner of the block to meet, how is the insurance dealt with etc.
Be careful when buying ground rents and make sure not to fall into the trap of being sucked in to paying an over inflated price just because what you are buying is called a ground rent.
Commercial property in Wales varies considerably depending on where in Wales you are talking about. One extreme is Cardiff and another extreme is Bridgend.
If you look at commercial property in Wales in general terms, then as an investor, you are spoilt for choice. You can invest in towns, cities, costal resorts and even a small island. The choices are endless and although commercial property in Wales may not experience the same growth as other parts of the UK, if your investment strategy is sound, then the long-terms prospects look bright.
A good percentage of commercial property owners in Wales seem to be ahead of the field in how realistic they are about what their properties are worth. This is having a real advantage on the commercial property market in Wales over the rest of the UK which is still experiencing extreme stagnation.