There was some hope earlier this year that the commercial property would begin to stabilise before starting the long road to recovery. Unfortunately, any potential stabilisation seems fleeting at the moment. Commercial property is still falling. Shops, restaurants, pubs, etc. are all still suffering – with no end in sight.

At the heart of the ongoing crisis is inflation that shows no signs of letting up. In fact, well-known pub group JD Wetherspoon went so far as to issue an inflation warning with its latest earning reports. The group, which owns some 840 sites across the UK, saw its operating costs spike by a mindboggling £73 million in the six months ending 29th January. The company’s pre-tax profits were down 90%.

How Inflation Affects Property

At first glance, it might be unclear why inflation has such a devastating impact on the commercial property market. It boils down to this: everything costs more. When inflation rises faster than wages, people have less money to spend. Meanwhile, the cost of everything they buy goes up.

Commercial property is affected in several ways. First of all, tenants cannot afford to pay their rent because their customers aren’t spending as much. Secondly, property loses value because fewer people are buying. You end up with a double-edged sword that can destroy property values very quickly. And unfortunately, the pub and restaurant sectors are hit unusually hard. When inflation is high, people stay home more than they go out.

Real Examples of Real Misery

JD Wetherspoon’s recent earnings report is a big red flag. But they aren’t the only troubled company in the restaurant and pub sector. There are many more examples of real suffering. Take Marston’s. They recently announced a plan to unload 61 freehold pubs in England and Wales. They are disposing of a mixture of properties that include leased and managed pubs.

The Restaurant Group (TRG) is also looking to shrink. They plan to dump another 35 properties on the heels of continued flat sales. TRG Is known for brand’s like Chiquito and Franky & Benny’s. Part of their reason for offloading properties is to reduce potential action from activist investors.

Ending the Energy Relief Scheme

Adding insult to injury is the government’s closing of the Energy Bill Relief Scheme (EBRS). Effective 1st April, the closure is expected to significantly impact countless small businesses already being pinched by higher energy costs. The Federation of Small Businesses (FBS) estimates that ending the scheme could force some companies to downsize, restructure, or even close altogether.

Under the scheme, the FBS estimates a pub with an annual £85,000 energy bill would only pay £25,000 with government relief. That same pub will now get a mere £2,000 in support, leaving an outstanding balance of £83,000. For a pub already struggling to pay the bills, such an astronomical hike in annual energy costs is unsustainable.

Perhaps We Can Help

The ongoing commercial property crisis continues to effect pubs and restaurants disproportionately. If you are a property owner struggling under the weight of high inflation and energy costs, perhaps we can help. We are still in a buying position. We are looking at all sorts of commercial properties that we believe might have value after this crisis is over. We are willing to take the risk.

Your commercial property certainly isn’t as valuable today as it was just a few years ago. But a month from now, it is likely to be worth even less. Meanwhile, you have your own financial struggles. Perhaps it’s time to take a break and sell your property.