There is some cause for optimism, says Jeremy Day
The Chancellor announced a rates holiday in last week’s Budget – no rates payable on businesses with a rateable value of less than £51,000 for a whole year. Great news if your business falls into that category, which according to commercial surveyor Jeremy Day, probably accounts for about 60% of retail businesses on Chiswick High Rd. Not so good if your business is in the higher bracket.
“We would have liked to see everywhere up to a rateable value of say £125,000 given something” says Jeremy, who is Commercial Director at Whitman & Co estate agents.
The move is intended to help small businesses, but the trouble with London is that some businesses which would elsewhere be classed as ‘small’, face such prohibitively high rent and rates here that it pushes them up into the higher bracket. Still, the change is welcome. Rent and rates are often quoted as the biggest problem preventing traders from making a decent living.
Things are improving, says Jeremy, with rents “adjusting” – ie. coming down, sometimes quite dramatically. There is a healthy amount of interest, he says, “at the right rental level” from new businesses wanting to fill the gaps in our High Rd.
Reasons to be cheerful
The decline of the High Rd has been a constant theme for at least the past five years – the rapid turnover of businesses, the increasing number of empty shops and the length of time for which they stand empty – the old Carphone Warehouse premises next to Zizzi being a case in point – not to mention the planning blight inflicted by Lendlease opposite Turnham Green.
“Chiswick is no worse than many places and I don’t think it’s broken” says Jeremy. He took over as commercial director at Whitmans last autumn but has worked in commercial property for 30 years, with big companies such as Colliers, King Sturge and JLL, so I take some comfort from him saying that.
Our problem, according to his diagnosis, is that ownership of Chiswick High Rd is so fragmented, each landlord is looking out for themselves, with little incentive to take actions that are in the wider community interest.
“Where you have one predominant landlord who controls a number of premises, they are more likely to invest in things such as the public realm” says Jeremy. In some towns where ownership is similarly fragmented, businesses have come together to form a Business Improvement District (BID) in partnership with their local council, as they have in Barnes, Richmond and Ealing (which is why some of us have had leaflets through the door urging us to shop at Ealing Broadway). Hounslow Council has tried to interest Chiswick in setting up a BID, but not enough are willing to pay their subs to make it work.
The High Rd has been stagnating and if you ask any business, although there are a range of reasons which inhibit their profits – Brexit uncertainty, increased labour costs, the difficulty of finding and retaining staff among them – the overriding problems they always cite are the exhorbitant levels of rent and rates.
Rents tumbling down
In Chiswick the commercial market has been dominated in recent years by one property agent, MJ Finn, known to drive a very hard bargain on behalf of his clients. Numerous retailers have vented their anger to me over the past few years about high rents he’s negotiated on behalf of landlords, because they’ve ended up with leases they couldn’t really afford, in order to continue trading in ‘their’ shop. He has however looked after the interests of his clients very successfully.
The market may have come to our rescue with rents. Jeremy is seeing some rents on both new lettings and lease renewals down by 20% – 30% from their peak. He reports at least six offers on empty retail properties and three offers on empty restaurant sites in the past few weeks. “There would appear to be some confidence in Chiswick as a location” he says.
Landlords are not all yet ready to accept the reality of the market; “some are quicker than others to accept the economic picture” he says. The equation they have to work out is whether it is better for them to hold out for the highest rent, or whether they should factor in the likelihood of their tenant’s survival with those overheads, and be prepared to take less, with the expectation that the tenant will stay longer. They also have to think about the cost of letting a property sit empty. “If you push a tenant too hard and they close up shop, as a landlord you can quickly go from an income of £60,000 to a loss of £30,000, as you still have to pay business rates on the empty property”.
No business rates for a year
This week’s Budget news is good for most of the smaller shops and cafes on the High Rd. In the café where we met to talk, which had a rateable value of £29,250, Chancellor Rishi Sunak’s announcement of a 12 month holiday in rates is worth nearly £10,000 to the owner, who told me it would make a huge difference. He has a list of things he’d like to do with that money to improve his business, starting with opening in the evenings.
Businesses whose rateable value is over the £51,000 limit don’t get any help. One retailer in that position told me not only was he disappointed not to have got any support, but that central government helping some businesses and not others put him at a commercial disadvantage with competitors. Jeremy would have liked to see a sliding scale, with premises between £51,000 and £125,000 attracting a 33% discount for example.
Chiswick High Rd has lost not only small businesses but also larger ones, part of national chains. Carluccio’s, Feather & Black, Fat Face, Maison Blanc and White Stuff are all examples of larger enterprises which have decided they couldn’t make a go of it here. Carluccio’s is an interesting example. The company went into company voluntary agreement (CVA) in 2018, closing 34 of its 103 restaurants across the UK. The branch in Chiswick closed but the one in Ealing stayed open. Why was that? Do Ealing people spend more money on Italian food?
Image above: Ollie Saunders; Chiswick High Rd photograph, Ian Wylie
Chiswick Tenants and Landlords Forum
It’s great that things are on the up for High Rd businesses, but clearly the Government is expecting the Coronavirus to hit businesses hard, as they don’t tend to hand out payment holidays for nothing. Good timing then for the new Chiswick Tenants and Landlords Forum, being set up by Ollie Saunders with Jeremy and fellow commercial property agents Andy Cole, of Farino Cole, already volunteering to take part.
Ollie heads up the Valuations department for JLL, the leading global commercial real estate services firm. The company is ranked 189th on the Fortune 500. As such he knows the industry well, but does not have a dog in this fight, as they say. His interest in Chiswick is as a resident rather than as an agent. Jeremy has recently worked with the Royal Institution of Chartered Surveyors (RICS) to publish the Code for Leasing Business Premises, which aims to protect small businesses in property transactions and will shortly become mandatory for all Chartered Surveyors.
Following the call put out here in The Chiswick Calendar, which was discussed enthusiastically at our recent public meeting, they are setting up a forum in which business tenants and business landlords can discuss the issues which affect them both. They’re setting up a forum in which business tenants and business landlords can discuss the issues which affect them both. It’s important to have transparency, so that new people coming in don’t pay rents which are way over the market rate, through ignorance, pushing up rents for everyone else as their leases fall due. It’s important to give both tenants and landlords confidence based on knowledge, says Jeremy, for them to understand each other’s position and to promote common initiatives and solutions based on that shared understanding. It would also be good to take some of the suspicion and aggression out of the debate.
Ollie says: “The commercial property market, and the rents and values being paid in the UK, have become more and more transparent in recent years. The High Road just has to reverse the decline so that it becomes the vibrant scene that we all want – with successful independent businesses paying rents that reflect the success of the High Street. Proactively sharing information can only be a good thing and will help ensure there is a positive future for the High Road for both landlords and tenants. The Coronovirus is putting enormous pressure on retailers who are talking to landlords who are sympathetic to their plight. We want to help provide greater information to help in those conversations and make sure people are properly advised about the reality of retail property.
Business rates need reforming and the Government’s announcement in the budget is only a single year – a sticking plaster solution for now!”
Jeremy Day and Ollie Saunders are part of the consortium of local businesses and residents who are behind the Flower Market initiative for Chiswick High Rd. My interview with Jeremy took place before the Prime Minister’s announcement that we should avoid pubs, restaurants and non-essential travel. What affect the Coronavirus has on the High Rd is another matter entirely.
If you would like to get in touch with them about the Tenants and Landlords initiative, you can contact Jeremy at Whitman’s: firstname.lastname@example.org or either of them through The Chiswick Calendar: email@example.com