I was fascinated to see EG’s report last week that a huge proportion of the UK’s retail property is owned by the British public. These are not wealthy speculators or sovereign wealth funds, but pension funds, collective investment schemes, local councils and REITs where 60% of the shares are also owned by institutions.
So, when retailers and leisure operators – many of whom are owned by wealthy individuals and large private equity houses – appear to be given the green light to not pay rent it is actually the British public who are being hit in the pocket.
In many cases it’s the key workers who are keeping Britain afloat right now, and whose reward for below-average pay is a secure public sector pension scheme, who will suffer because retail property loses income during the current crisis.In some instances, retailers that have remained open during the pandemic are threatening to withhold rent while still trading.
At British Land we are working hard to support our customers who have been hit hard by this crisis, but I firmly believe that those who can pay, should pay. This isn’t a victimless crime: the victims are those whose long-term future is tied up in the 70% of retail property, which EG revealed last week is owned by the British public.
Government is reacting to an unprecedented situation and should be applauded for many of the actions it’s taken to address the fallout of Covid-19, including its measures to support the retail industry. But the move fails to distinguish “can’t” from “won’t” and is akin to squeezing the toothpaste from one end of the tube to the other. Without a resolution you will stifle much-needed investment into the UK’s high streets, shopping centres and retail parks.
That’s the nub of the problem, so what are the answers?
Firstly, we need an integrated solution – not one which sees landlords and tenants pitted against each other, one side resorting to the winding up order and the other refusing to pay rent.
The “furloughed space grant” scheme proposed by the British Property Federation, Revo and the British Retail Consortium is an ideal example of this, with the state covering fixed costs of businesses that have experienced dramatic falls in turnover, and the pain shared between landlord and tenant.
There are short-term ideas to get town centres back on their feet, and longer-term solutions to bring about a full-scale revival.
Short-term measures
In the short-term, we recommend extending time limits for existing planning permissions by one to three years.
Almost all new development will be delayed, and by extending consents government would save developers the pain and cost of re-submitting for schemes that could create new jobs over the short to medium term.
Next, we need a different approach to Section 106 payments: at the moment these and Community Infrastructure Levy costs are nearly all paid upfront – cash-strapped property owners will simply delay new development if they have to pay these charges straight away.
Allowing greater flexibility in use classes to respond to the increasingly blurred lines between ‘live, work and play’ and promote innovation would be an immediate win, and there is also a case for expanding permitted development rights to allow conversion away from retail without the need for planning permission.
Securing the future
Next, some ideas for the future: we’d urge government to consider extending the £10bn Single Housing Infrastructure Fund to cover economic development and regeneration. Or expand the use of planning permissions in principle to include commercial development on designated brownfield land.
And why not give local authorities permission for greater flexibility to increase planning fees to help deliver new development quickly and sustainably?
The property industry has the tools in its armoury to help revive Britain after the Covid-19 pandemic, but we also need radical new thinking to address this national task.
We have spent years papering over the cracks in town centres, where many empty retail units are filled with charity shops and pop-ups to mask the true picture of retail over-supply.
This is a chance to re-think how we approach towns and cities across the UK, retaining the retail real estate that has a future and finding new, exciting uses for property that has fallen vacant.
Because, as we learnt last week, if the UK’s retail estate is allowed to continue to slide it’s all of us who will pay through our depleted pensions and savings schemes.
Listen to a podcast with Chris Grigg talking about this issue:
Chris Grigg is chief executive of British Land
