The recent Financial Times feature on ‘Retail Crisis Shines Spotlight on Property Values’ suggests that larger firms of Property Surveyors and Valuers, when undertaking reports of retail property investments, are failing to reflect the mounting problems in the sector and that, in so doing, a conflict of interest is being demonstrated.
Andrew Idle Associates, along with other firms Regulated by the Royal Institution of Chartered Surveyors (RICS) received a guidance note from the RICS at the close of 2018 warning of the need to take into account structural changes in the retail market which could impact in falling values.
It takes time of course for such changes to reflect in significant vacancies as units become empty, or falling rents as inducements are offered to secure new tenants. But the impact is starting to be felt up and down the UK with a recent report claiming that some vacant retail space is taking many months to re-let.
Figures published in the past few days show that high street retail sales fell again in the pre-Christmas build up and point to a steady decline over the past few years. Even some online retailers have seen falling profits, indicating that the tightening of disposable income (and perhaps some caution owing to Brexit) are having their effect.
As a retail Agent, it is important not to be over-influenced by negative market sentiment. The smaller property investment companies for whom Andrew Idle Associates act are generally realistic in their expectations and prepared to listen to and take into account our advice. By offering sensible asking rents and flexible terms, and by a willingness to consider new start-ups where necessary provided an appropriate advance rental payment is offered, new tenants can usually be found.
The situation is less straightforward for those Agents who are marketing/managing major shopping centres where bankers are involved in vetting tenants, shareholders are involved and the whole operation is run in an institutionalised way. In my opinion, it is far more likely in such a scenario that Valuers will be under pressure to ‘paper over the cracks’ and fail to reflect true market conditions in their reporting.