WHITMAN & CO COMMERCIAL

In the commercial sector, business continued through the lockdown, although one or two deals did fall by the wayside, or were considerably delayed.
 
 Sadly, we have had to provide advice to a number of businesses for whom the pandemic has been extremely difficult. This has extended to both landlords, who have received little financial support, and to tenants (particularly in the retail and leisure sectors).
 
 Perhaps the sector most-structurally impacted by the pandemic has been the office sector, obviously with so many people working from home. We do not think the office is dead though, and our belief is that locations such as Chiswick and surrounding areas may ultimately benefit, at the expense of central London, as businesses seek to reduce their office footprint overall, and cut out the time consuming, expensive and potentially virus-risky commute.
 
 Since lockdown ended, we have let three shops on Chiswick High Road, with several more under offer, and taken on some exciting new instructions, including the former Byron restaurant, which is already attracting significant interest.
 
 A very pleasing factor is the recent return of enquiries from traditional retailers, which is in addition to a constantly strong enquiry-base for cafes, restaurants, and for specialist uses like gyms, clinics, etc. The changes to the Use Classes Order, which introduces a new general business services class (Class E) from 1st September will make it much easier for a more-diverse range of uses to find suitable premises in traditional retail locations.
 
 Sadly there will still be challenges for some, as a result of the ending of various government support measures including furloughing and rent moratoria. We are here to offer professional support and advise where we can.

Whilst the idea was conceived before the pandemic, it is perhaps timely that the new Chiswick Flower Market, which we have been proud to be involved with, and are glad to sponsor, is arriving on 6th September to help lift the spirits. Aimed at bringing new custom to Chiswick, and putting our excellent local retail offering firmly on the London map, we think this is going to be very exciting. Look out for the Whitman & Co plant crèche, and some familiar faces riding delivery bikes!
 
We are expecting an extremely busy autumn!

These are worrying times for us all, both in business and at home. Our first priorities should be for our health, but there are significant economic uncertainties to which people are also seeking answers.

We offer some high level comments and guidance, in these unprecedented and fast moving times, aimed particularly at small businesses who are impacted by cash flow problems.
We recognise that problems may be exacerbated by the imminent March Quarter Day (25th March) when many businesses will be expected to make the quarterly rent payment in advance.

Government Support

The Chancellor has acted promptly on 17th March to provide business support, and further details are now emerging. We will aim to update this note further as and when we can. To summarise so far:

All businesses who were previously benefiting from Small Business Relief, that is a business who is occupying a single property with a rateable value below £15,000 and where that is the only place of business, will be entitled to a cash grant of £10,000.

https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief

This grant will be accessed through the local authority and we are told we will receive further details from them in April.

For slightly larger occupiers in the retail, leisure and hospitality sectors, with a rateable value between £15,000 and £51,000, you will be entitled to a cash grant of £25,000.

We have also yet to understand how it will apply to companies with multiple properties, say 4 properties at £30,000RV. We might expect that there would be only one grant per company, but it is possible that it may apply per rated property. Again, we are told that it will be accessed through the local authority with details being advised in April.

Finally, as has been widely reported in the press, for all properties in the retail, leisure and hospitality sectors there will be a 100% rates holiday for 12 months from 1st April. No rates payable, providing that you are the retailer/operator. Any Rates bills for 2020/2021 will be cancelled if you are in the relevant sectors.
NB. We expect that this will initially be administered by reference to the use that the Valuation Office classifies for your premises (Shop & Premises, Restaurant & Premises, etc). If you are trading from premises classed as, say, Office & Premises, then complications may arise and you would be wise to seek advice.

You can check your rateable value and the defined rating use by entering your property postcode here:

Check your Rateable Value Here

To qualify for these reliefs and grants you will have to be a rate-payer. Small businesses in serviced offices or on inclusive rents will not qualify. We might hope for further support for these businesses in time.

Takeaways and Deliveries 

The other major announcement to date is that permitted development rights have been introduced to immediately allow pubs, restaurants and other hospitality venues previously trading with A3 planning consent to allow takeaway and deliveries for a period of at least 12 months. This might offer businesses an opportunity to continue to service customers whilst social isolation is ongoing.

You should notify the local authority of the date that you start to take advantage of this change and the 12 months will be measured from that date.

Landlords & Owner Occupiers

If you are landlord or owner of property with a mortgage, the Chancellor has advised that mortgage lenders will be providing a minimum three month mortgage holiday. Details to be advised.

If your property is currently vacant and to let it is not apparent that you are entitled to benefit from any of the above business rates reliefs. It will be necessary to consider whether other options might exist to mitigate business rates liabilities.

Commercial Rents

The situation with commercial rent liability, which for a lot of people will fall due on 25th March, is complex, and case-by-case advice may be necessary.
In summary:

• A lease is a contract and, unless the government introduces radical controls in this area, then existing legislation will apply. [Note, the Housing Minister further announced plans to prevent eviction in the residential sector on 18th March. Perhaps similar rules may be applied to business premises for a period of time.]

• Rent is technically due whether it is demanded or not.
• Leases will usually provide for interest liability in the event of non-payment, often accruing at a rate equivalent to say 4% over base rate.
• Landlords can exercise various rights in relation to non-payment of rent, including a process called CRAR (Commercial Rent Arrears Recovery), which is akin to sending in a bailiff. They must give 7 days notice of their intention to do so. This is the usual first step.
• Alternative steps might include litigation i.e. suing for recovery through the courts, or a process called forfeiture, which is the most extreme, involving peaceable re-entry of the property to repossess. There are significant legal constraints around this process. In summary therefore, these are longer processes - and in any event the courts may look dimly on such actions, if they are functioning themselves.
• If you have provided a rent deposit then the landlord is likely to be entitled to take funds from this. You may be obliged to top it back up under the terms of the rent deposit deed.
• If you have provided a company guarantee or personal guarantee then the landlord could seek to enact these guarantees, and serve demands upon the guarantors. These would be likely to be binding, but litigation would be needed, as above, to secure ultimate payment.

Options available

Our advice, if you are worried about your ability to meet financial commitments, is to talk to your landlord, or ask a professional adviser to do so on your behalf.

It may be possible to agree to pay rent monthly, rather than quarterly, in advance, to assist cashflow. They may even permit a rent holiday or rent reduction.
Landlords will each need to consider their own situation, and if the mortgage holiday provides them with some respite against interest payment liability then perhaps they can share this by way of a rent holiday or rent reduction.

Equally, they will need to decide whether to take a short term or a long-term view. It is often better to keep a premises let, even allowing a reduction in revenue in the short term, set against owning a vacant unit where, as things stand, they will be liable for empty business rates - a binary swing from receiving rental income to paying business rate outgoings.

Whilst some landlords will be more draconian than others, our experience is that many will be reasonable in considering their tenants’ plight. Many major companies have recently gone through Company Voluntary Arrangement, which have resulted in rents being reduced, sometimes quite radically, and landlords should recognise the realities faced by businesses, particularly on the High Street.

It is interesting, for example, to note that New Look, who have already been through a CVA, resulting in rents dropping in some cases by up to 60%, have nonetheless still asked landlords for a minimum three month rent holiday. H&M have asked the same question.

Summary

We recognise that in these difficult times businesses will be faced with huge decisions about protection and deployment of their cash, in relation to pressures beyond just property costs, including other creditors, staff costs, tax liabilities, etc.

If we can provide any support or assistance in relation to pressing property problems then we would be pleased to provide an initial consultation for free, and provide any necessary ongoing support at a significantly discounted rate to local businesses (our own health permitting) over the next three months.

CONTACT:

Jeremy Day FRICS Email: jd@whitmanandco.com Tel: 020 8747 8800 Mob: 07966 810030

I have been observing retailing on the High Road, and Chiswick’s other fabulous retail streets, from a different angle since I joined the commercial business at Whitman & Co a couple of months ago. I thought I would write my first blog about the retail sector, as I have found it has been a dominant focus so far, with a string of enquiries - from all sorts of directions.
Backdrop

You only have to turn on the morning radio to hear of the woes facing the UK High Street. This is a national, even global, issue - as a result of the rise in online shopping and changes in habit. Last week Mothercare entered Administration, having already been through a Company Voluntary Agreement (CVA) that had been intended to have given them a lifeline. This week Clintons are also back in the news. Sadly, there will be more.

Chiswick is no different to many locations. It won’t have escaped notice that there are a number of vacant shops locally, some of which have been unoccupied for quite a time. Are we watching a slow and inevitable decline in retailing? I don’t think so - but we do need to act.

The debate is the same everywhere. Costs of doing retail business are rising (staff costs, insurance, technology, regulation, logistics, etc). Meanwhile, footfall and consumer spending in shops are falling, largely because of the growth in online retailing - the switch from “bricks’ to clicks”.

Against this backdrop, property occupancy costs (rent, rates, service charges) are often now too high. The inevitable impact is shop closures, either at lease-expiry, or occasionally, sadly, through insolvency.

What needs to happen to protect local retailing and encourage it to thrive?

Without new retailers (both chains and independents) coming and succeeding, and those already here thriving (and staying), there is of course risk that we find ourselves in the same steady downward-spiral as many other places.

We have been pleased to attract Hotel Chocolat to Chiswick High Road recently, but it is important that they do well. Other retailers are watching and waiting to follow -so long as rents are set correctly, and customer-spending is there. We are blessed with a special retailing character in Chiswick, a healthy mix of independents and multiples, which we must surely protect?

Clearly, the bottom line is to spend more money in our local shops. Chiswick Locals, and great schemes like the Chiswick Calendar loyalty card are excellent in encouraging  this. As we approach Christmas we can all do our bit, by avoiding online temptations and by shopping in local outlets.

• Shops need customers to come, not just once but regularly, returning again and again. They need them to dwell, and spend. 
• Customers need variety and choice; of products, services, styles and price-points. 
• We need places to eat, drink, socialise, laugh, excite, rest, recuperate. We need staples and amenities. 
• We need luxuries. 
• We need chains and we need independents.Retailers must consistently deliver what customers want, with good service, and at the right price.

The retail environment must be safe and compelling. Access, transport and parking should be easy, the shopping environment clean and inviting.

Neighbouring areas in Hammersmith, Acton & Ealing have introduced Business Improvement Districts (BIDs) and recruited town centre managers to coordinate activity, but to date these discussions in Chiswick have not gained traction. There is no single dominant investor, nor retail focus group in Chiswick. Perhaps we need one?

In my view the fragmented nature of the retail property market here makes it a bit more difficult to attract new, interesting and entrepreneurial retailers to Chiswick. Whitman & Co Commercial recently attended a major retailing conference in Central London to do just that, and we intend to continue to build on the promotion of Chiswick as a place to do retail business in west London.

What more can we do?

We can all play a part in ensuring that Chiswick remains a vibrant retailing location. The property owning community (and advisors like Whitman & Co Commercial) are also central to this of course.

In these times of political manifestos I therefore thought I would set down my own pledges, to ensure I do my bit. As a real estate advisor, representing both landlords and tenants in Chiswick, I will:

• Continuously promote Chiswick to the national retailer community.
• Lobby through the Royal Institution of Chartered Surveyors (RICS) and other channels to bring about much-needed changes in the Business Rates regime.
• Lobby planners to ensure planning policy (and individual planning applications) support a thriving high street.
• Protect the streetscape by urging clients to keep vacant shops clean and attractive, with windows dressed or decorated where possible.
• On a day-to-day basis, help ensure that the shopping environment is appealing, by personally reporting rubbish, litter, flooding from blocked drains, etc, that I see as I go about the area.
• Ensure that, whether advising landlords or tenants, the lease terms agreed (rent, but also other terms) are realistic, ethical, equitable, affordable, and clear.   (I have for many years been a representative on the RICS panel that produces the Code for Leasing Business Premises, which I hope is shortly to become mandatory for Chartered Surveyors - more next time perhaps). Of course this is a fine line to tread, because the lease is a commercial contract, and there is often much at stake in the financial bargain between landlord and tenant. For the landlord, the property is often a pension, or a long term investment of hard-earned capital. For the tenant, the rent commitment can ultimately be the difference between success or failure, certainly when no other leavers are left to be pulled. But we must be transparent and fair.

• Finally, I have personally adopted a ‘buy local first’ policy. I will minimise online spend, and enjoy the excellent service and diverse offerings that Chiswick retail has to offer.

To conclude:

In these challenging times for retailing everywhere, it is surely better to see a vibrant and fully-occupied High Road, Turnham Green Terrace, Devonshire Road & Acton Lane (as well as the many smaller clusters of shops around our lovely neighbourhood). Whitman & Co Commercial aim to do our part to encourage and facilitate this.
The most important advice, whether you’re landlord or tenant, is to take professional property advice about commercial property situations, with Whitman & Co, or with other eminent local firms!

Jeremy Day FRICS
12th November 2019