» Commercial Property – Who Buys High Street Shops?

Commercial Property – Who Buys High Street Shops?

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.

 

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