Assessing the proper-tunity in the current climate

We all know the pandemic has cast a terrible cloud over Britain’s economy, with whole sectors forced to shut, millions of people on furlough, and more than 800,000 made redundant. 

But there is a silver lining for at least some of those who’ve lost their jobs and received an unexpected redundancy package: the widely reported crash in retail rents and freehold commercial property. This may mean that would-be business owners are able to pick up prime-location property for a song.  

The Royal Institution of Chartered Surveyors have recently reported depressed demand for both retail and office space in the last quarter. This supply surplus puts prospective tenants at an advantage when negotiating a lease deal.  

Retail giants including Debenhams, Top Shop and Miss Selfridge have collapsed, with buyers only wanting the brands and websites, not the bricks-and-mortar stores, and commercial landlords have already been forced to slash rents to historic lows as department stores and other household names on the high street warn they’ll go to the wall unless landlords renegotiate rents or give them pandemic-long payment holidays.  

Other city centre businesses are tottering towards joining them as the hordes of office workers they depended on for their trade have got used to working from home and, in so many cases, will never be coming back.  That means that anyone needing premises for, say, a gym, a drop-in accountancy firm, a maths tuition centre or an upmarket salon could start up for a fraction of the previous cost and look forward to much lower outgoings for years to come.  

Established franchises are already snapping up property in places they couldn’t previously afford or justify the rents for, and newly-redundant people considering buying a franchise are likely to benefit dramatically from the retail rent downturn.  Some businesses will always need premises, and potential franchisees are eyeing up some prime-location bargains while they consider whether to take the plunge and work for themselves instead of an unappreciative boss.  

Anyone who doubts the effect the pandemic and the retail downturn that preceded it are having on retail and office rents should look at the RICS UK Commercial Market Survey for the last quarter of 2020—q4-2020.pdf which shows the biggest rise in empty retail space since its records began in 1999 and the fastest rise in leasable office space since the global financial crisis, with no sign of improvement in retail rental projections in the next 12 months.  “Unsurprisingly, incentive packages on offer to tenants were increased significantly in both cases during Q4,” the authoritative survey says.  

RICS economist Tarrant Parsons adds: “Both the office and retail sectors continue to see occupier and investor demand diminish, with expectations for rents and capital values remaining deeply negative for the time being.”  

And that, for potential franchisees sitting on a redundancy payout, is an opportunity knocking.  To learn more about franchising in the UK and the opportunities it presents, check out this informative webinar, supported by Lloyds Banking Group and Hitachi Capital (UK) PLC.