For those of you who think the worst is over for retailers, think again. Since the start of 2016, the following retailers have failed: BhS, Beales, Sports Authority, Kendall Mint Cake, Castle Bakery, Hawick Knitwear, Ben Sherman, Brantano, Blue Inc, John Cooper & Sons, Atterley, McEwans of Perth, Trodd Ltd, Furniture Barn and Austins of Derry. This year will be another tough year for retailers and as more struggle, more shops will fall vacant which will cause retail property values to fall.
The commercial property market in general has performed quite well since the start of 2016 but cracks are slowly starting to appear. There are many factors which affect the commercial property market, directly and indirectly, which include the following: (1) interest rates, (2) the stock market, (3) the price of oil, (4) the EU referendum, (5) tax, (6) planning policies, (7) inflation, (8) problems overseas including the USA, China and Russia (9) unemployment and (10) house prices. There are many other factors which also affect commercial property values but those mentioned above are the main drivers. The commercial property market is certainly being adversely affected by the threat of interest rates rising, the problems being experienced in China, the possible exit of the UK from the European Union, stamp duty increases, tax changes affecting buy-to-let landlords and many more.
There is no doubt that commercial property values in some sectors and in some locations are starting to level off and even fall. Many investors are nervous about the market and so are either selling, thinking values have peaked, or are holding off buying anything new.
No-one really knows what the future holds but remember this – if you are likely to face financial ruin as a result of your commercial property falling in value, then when there are signs and talk that this may be on the way, and your commercial property has increased in value from when you bought it, then you would be foolish not to sell.
Sell My Commercial Property are still very keen to buy high street retail shops. Although this sector has still not recovered from the worldwide financial crisis of 2008/2009, and many property investors are still nervous about buying high street retail shops, we at Sell My Commercial Property know retail, like retail and still want to buy retail.
If you own a high street shop, anywhere in the UK, and want to sell, please contact us so that we may make you an offer. It is free and you will be under no obligation to accept our offer.
Carter Jonas is predicting total returns from commercial property will fall to 8.8% in 2016.
This contrasts with total returns of 13.4% this year. The property consultancy said yields were at or approaching previous lows and that capital value growth was unlikely to drive returns as it has done in recent times.
Jeremy Gidman, head of investment and asset management, Carter Jonas, said: “The party of yield compression is largely over – yields are back to their 2007/2008 peak in most areas of the market, and we are unlikely to see yields hardening much further in 2016 due to wider economic conditions.
“The fact that rental growth is coming through more widely should help to sustain the investment market, although it is difficult to see the volume of transactions in 2016 matching the record level we have witnessed this year.”
He also predicted a greater divergence between prime and secondary retail as large numbers of 25 year leases entered into in the early 1990s come to an end.
In central London, the firm predicated that although further yield compression was unlikely, shortages of office space would continue to drive strong rental growth and push total returns up towards double digits. The hotspots in the market could also shift.
Darren Yates, head of research, Carter Jonas, said: “There is a growing sense that parts of central London are expensive and growth will shift towards emerging locations such as Victoria, Battersea and Stratford, as occupiers seek more cost-effective solutions.”
With development yet to pick up in the regions and with steady occupier demand, he also predicted another good year for city centre office markets in places like Birmingham, Manchester and Leeds.
The firm was also positive about the fundamentals of occupier demand and supply in other markets such as industrial and residential.
However, Yates warned that the market could still experience a slowdown.
He said: “Activity may also cool, against a backdrop of the EU debate and the prospect of higher interest rates. It should also be remembered that, seven years after the financial crisis, the market is approaching its natural peak in the cycle.”
We regularly receive calls here at Sell My Commercial Property from individuals who think we are agents and who ask us for advice on how to sell their shops. Once we explain that we are in fact investors who buy property, there is a sigh of relief and a change in attitude. Some people still seem sceptical and untrusting of commercial and residential agents and prefer to deal directly with buyers. This is one of the reasons why we started Sell My Commercial Property.
There are many ways to sell your shop and we make this abundantly clear to all our callers. You can contact a company like ours, instruct a local agent, put an advert in the newspaper, speak to family and friends or place your property in an auction. With each of these options, there are upsides as well as downsides. We never claim we can pay you more for your property than you will receive if you say instruct an agent but one thing is clear when you contact us, deal with us and decide to sell to us – we are straight talking, open, honest, professional, knowledgeable and quick.
Therefore, if you want to sell your commercial property, and do not wish to instruct an agent, you know where to come.
The short answer to this is many things! However, those who own retail property and especially those who were looking to sell their shops will have noticed that more retailers have disappeared from the high streets, shops are still standing empty, high streets have still not recovered from 2007 and there are a shortage of buyers. Retail sales slowed in February, weakened in August and black Friday in December had a limited impact (Retail Economics). American Apparel, Direct Golf, East, Motor World, Cooplands, Mexx, Bank and many more went into administration this year. However, on the positive side, retail administrations were down by 1/3 in the first half of 2015, compared to the same period in the first 6 months of last year.
High street retail property values are likely to remain static, but some say may fall, throughout 2016. Retailers will continue to struggle, investors will continue to favour buying offices and the public will continue to shop from the comfort of their homes. As demand for shops declines, which will lead to zero/negative rental growth, many investors will stay away from buying high street shops, especially those in secondary and tertiary locations. Those who are still buying retail property today are very risk adverse and only interested in prime sites occupied by big named tenants.
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.
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- High Street retail failures in 2016
- Business Rates
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