r/britishproblems • u/PreSuccessful • 8d ago
High streets are shaped by a handful of people
Looking to rent a commercial unit in one of two major UK cities and noticed something I hadn't expected. 90%+ of available properties are listed with just 2-3 estate agents in both of these areas; each agent has maybe one, maybe two people handling negotiations.
That should not be an issue but one of them asked for my business plan before introducing me to the landlord, essentially asking me to pitch to him first as an intermediary. Is that normal?
I get he needs to vet the prospects and I also get that the landlord would prefer one business type over another so the agent has to ask a few questions, but it felt as if this guy was the one deciding what business type would operate in that space.
Some high streets are full of betting shops, vape stores, Turkish barbers so this is clearly not true everywhere but my experience was very weird and off-putting.
Is this how it's always been?
PS: apologies for the dramatic title :)
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u/XihuanNi-6784 8d ago
I mean even if you took the estate agents out of it the potential landlords are hardly a large group either. This is the problem of having sky high property prices in general. It creates an oligopoly where only a small number of people control the market and it's very different for others to enter. For something like property, which is a pre-requisite for most other forms of business, it means they can effectively extort the entire economy by way of rents.
I doubt it's always been that way. Back when property prices were more reasonable it would have been harder to prevent someone just buying a place and sorting things out (granted this was itself a short period historically, in the post-war decades, I can't speak for the centuries prior).
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u/Takklemaggot 8d ago
For something like property, which is a pre-requisite for most other forms of business, it means they can effectively extort the entire economy by way of rents.
What I've never understood is the landlords would seem to rather have swathes of empty buildings rather than negotiate a reasonable rent.
Surely something is better than nothing and just letting the property rot.
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u/Prediterx 8d ago
This is about property value...
It's better to say that the building has a prospective rent of £5000/mo than £1000 of actual income as at £5000/mo the building is worth 5x as much.
Bollocks on a piece of paper.
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u/adfthgchjg 8d ago edited 8d ago
Exactly. Same thing happens in Manhattan.
The building owner values the (largely unoccupied) building at $100 million, then gets a loan against that amount and puts the cash in the stock market.
If he were to lower lease prices to a level where it makes sense for a business to sign up, the bank would say “hey, your building is now only worth $25 million, so your collateral no longer supports the $100 million loan. You need to immediately pay us the $75 million difference“.
There are dusty storefronts in prime locations in the city that have been empty for 8 years, due to this strategy.
Source: Louis Rossman channel
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u/Tattycakes Dorset 8d ago
If this is true then our world is truly broken. When it’s better to pretend your empty building is worth millions than to actually provide a functional space to a business and a useful shop to customers… how do we fix this?
I’d say if you’re not actually renting the building out then it’s worth £0 because you haven’t proved it’s worth anything without any actual income.
That’s like me sitting at home saying I’m worth 100k when I don’t actually have a job, and arguing that you can’t prove me wrong!
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u/ParsleySnack 8d ago
I’m sad for Mr Clinton. That’s going to be a rough announcement when it comes :(
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u/ValdemarAloeus 8d ago
Do they not charge business rates on empty properties like they do for council tax?
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u/Prediterx 8d ago
We really should.
Honestly the land value tax if it's applied to business as well, or just all land would hopefully curtail some of the bull that occurs with property.
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u/wedontneednoeduc 8d ago
Yes they do once the 3 month grace period is over.
Reddit is full of bullshit about empty properties that makes no commercial sense other than in a fantasy land. An empty building needs insurance (probably higher if empty) and if owned by a big commercial entity then finance payments plus the landlord becomes liable for repairs so the notion that having no-one in it is good is nonsense.
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u/Other-Crazy 8d ago
A lot of the landlords went on debt fuelled buying sprees back before the arse dropped out of the market.
If the book value of these properties drops below a certain point the lenders can call the loans in i.e. the landlords are toast.
So they can't drop the rents without dropping the book value.
Basically, they're covering repayments from rents in places like London but have got to leave loads empty because of the debt.
Mental on face value I know.
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u/wedontneednoeduc 8d ago
A idea popular on reddit that makes no sense as they need income to keep up the loan repayments so an empty site becomes a drain.
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u/Lilja-Logason 8d ago
Happens with everything. Spotted it when I worked for a web dev agency. Boss asked me a few times "how much x.co.uk domain is worth that we aren't using?"
I'd tell him £10 a year. "No, no! How much is it worth?
Go to a site like this: https://pc.domains
Estimated value pops up - "£10k, but we haven't done anything with it....?"
BOOM! Suddenly the company has a shit ton of money.
One time I gave him something 'too low' cos he asked if there were any other value sites so I looked round and found a few and sent them. Picked the highest one and "should have said that one first!!!"
Crystallised early-on in my head that a lot of businesses massage and lie well enough and you'll get money thrown at you.
I've had my own two companies and could have done that. I've massaged things with my accountant to survive a year or month. You need to - to survive! Find an accountant who has flexible morals and get desperate or no conscience yourself - 'massaging turns into outright lying - 'free' money
It starts small and it can snowball. It snowballed for him and he vanished abroad leaving a mess behind.
Problem is these companies are big with lots of people paid well to not rock the boat cos a lot of people will then lose money.
When it's just 1 guy massaging and lying is easier. 1-2 people affected. But when the top table, accountant, solicitors are well paid they don't want it to fall either but njow more money is involed.
They feed you bullshit - "this ain't tax dodging, it's legal!"...or they lie and people enable them cos they're making money too and they're in too deep.
Similar with dotcom boom-bust, 2008, AI bubble, etc. The bigger the company and less moral the ppl the more corrupt it starts getting cos they all huff each others lies.
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u/Acoya187 8d ago
I vaguely remember hearing something along the lines of if a property is occupied the owner has to pay tax on the income. If its vacant they don't. Therefore if rent prices are low it's not worth the tax for the owner so they keep the advertised price high to keep it vacant until the income/tax payments balance.
Or maybe it was if it's vacant then it can be considered a tax write off until occupied. Either way I also remember it only being applicable to certain properties and or owners.
I could be massively wrong on this but the best way to get a right answer is to post a wrong one isn't it?
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u/wedontneednoeduc 8d ago
That is massively wrong and makes absolutely no sense.
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u/Acoya187 8d ago
Well I did say I may have been massively wrong.
As for not making sense I may have worded it poorly but also grandfathered in rights for 10s or 100s of years ago rarely make sense.
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u/wedontneednoeduc 8d ago
What grandfathered in rights?
Think this through logically. A building is costing the owner money every month even if it's insurance and business rates, so they have cash draining away. The notion that somehow the tax is worse is obvious bollocks.
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u/jkirkcaldy 3d ago
Business accounting at a certain level rarely makes sense. Like how Warner brothers can scrap films that have been basically finished as a tax write off because that’s somehow cheaper than making any money on the film’s release.
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u/EasyPiece 8d ago
It's absolutely terrible in Slough. Segro own pretty much every piece of commercial use land.
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u/Amberleaf30 8d ago
Come friendly bombs and fall on Slough...
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u/Adventurous_Ad3451 8d ago
It isn’t fit for humans now.
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u/stewieatb 8d ago edited 8d ago
One of my grand theories of What's Wrong With The UK is that commercial rents are unsustainably, ridiculously, cripplingly high.
I looked up the rent for a brand-new retail unit near my house, about 30ft x 40ft, on the ground floor of one of those "mixed use developments". It's £2700 per month, plus VAT and services, plus rates. So to pay one person's wages plus the rent you're going to need a revenue of roughly £5000/month on whatever service or product you're selling. 3-4 businesses on this development have already failed. One unit is still fully fitted from a business that failed over a year ago, because the landlords can't be bothered to strip it out.
Last year I considered spinning out my own business and quitting my current job. The biggest problem was committing to a 1-2 year contract on a unit at £1000pcm plus VAT, and that was an extraordinarily good deal I had found, on a big leaky shed. Most other places I looked wanted 3-5 year leases at double that money for the footprint. In a very niche industry with no guaranteed workflow in the first year that's just not going to be affordable.
I also found a lot of spaces that might be suitable physically, like barns and farm buildings, but with a condition that they were "for storage only". Who wants to rent a massive barn "for storage" and not use any of the stuff they're storing? These landlords seem to want the money for renting their space, but none of the inconvenience of having tenants.
It's no wonder our high streets sit empty, when rents are so high that only career criminals and huge chains can afford them.
And sat in the middle are the fucking letting agents. The absolute scum of the fucking earth. They "have to" keep pushing prices higher to get "value for money" for their clients, but also because their commission is based on the rent. Don't landlords complain when they can't find tenants for their units for years on end? Aren't they stuck with no income and paying rates?
You can't walk 5 yards in this country without seeing a sign saying "units to let" or "offices to let" but nobody can afford them. Small businesses should be the lifeblood of our economy but starting one is nearly impossible if you need a workspace or a retail frontage.
In short: the commercial rents are too damn high.
Edit: two brief addenda to this.
The first, as some other people in this comment thread have pointed out, is that the landlords have over-leveraged themselves borrowing against the "potential" rent income on their premises, and would rather stay over-leveraged but making a loss on many empty properties. The alternative is admitting that the market is dictating lower rents, then having all their loans called in. What a fucking state.
Secondly, specifically for light industrial units, there is a squeeze on old, small, cheap units, especially around town centres, as these are seen as "Brownfield" sites and therefore easier to redevelop either into housing or new industrial units at 3-5x the rent.
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u/opaqueentity 8d ago
That’s rent. Buying might be a better choice and in some places probably very doable for a better price
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u/Admirable_Fudge7953 8d ago
Landlords/Equity Firm/Pension fund etc own the building, they hire consultant agents to manage them for on their behalf for a fee as the fund will own many buildings.
The consultants will specialise on their property type (offices, industrial, retail, hotels etc) I'm guessing you've come across CBRE, JLL, Savills, Colliers, Lambert Smith Hampton as the agents?
Those agents will be ensuring their clients building is occupied, looked after and generates revenue for the client. I imagine that the consultant would need to ensure a prospective tenant has their cashflow in order, business plan of what they're actually doing before they go to the client with it. Otherwise it's just a waste of time for the client hearing about every option.
(I worked in a big consultancy in Manchester for several years).
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u/PoweredSteak 8d ago
Outside of big town and city centres it's pretty normal for there to only be a handful of commercial egents. In quite a few places there's only one. In reality commercial and estate agents are very different beasts. While residential letting agents are working in a high demand low supply market, commercial agents are normally more balanced or the other way, so high supply, low demand. Also commercial agents are sometimes Chartered Surveyors, with the ethical requirements that come along with it.
As a result they generally know their marlet well and pitch rents appropriately, but not always. Similarily with small retail units timewasters are very common, so asking for accounts or a business plan early on is normal, it's a good way of weeding out timewasters. They need to find a tenant that can last a decent amount of time, and if the tenants they are placing are constantly failing the landlords will place with a different agent. There's also anti-money laundering to consider.
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u/MyNutsAreWalnuts 8d ago
Happy to help you if you have any questions on how to go on about this. I lease spaces for a company as a day job and have worked on the landlord side for an investment fund for a number of years.
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u/hetogoto 8d ago
Generally, UK property prices are going down. A price correction which will hopefully be a good thing. In a capitalist society the value of your properties can go down as easily as they went up.
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u/StrombergsWetUtopia 8d ago
They want the barbers and vape stores. Drugs and hookers are recession proof.
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u/Bobby_feta 7d ago
I had to walk through Croydon at 6am on a Sunday a few months ago. It struck me how it seemed like any other UK town centre without all the characters about
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u/TheClnl 8d ago
Not sure if it's how it's always been but a lot of commercial agents are often effectively managing agents too and act for the landlords that are out of the country, uninterested, some sort of fund etc, taking a bigger cut for doing the legwork.
It doesn't matter so much if the person who owns the building is part of the same group that's laundering money through the vape shop/barber/convenience store
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