What the Portas review could mean for town centre property owners

January 31, 2012

In May 2011, Mary Portas was commissioned by the government to conduct an independent review of the state of the British high street and the future of town centres.  The Portas Review (“the Review”) was published by the Department for Business Innovation and Skills on 13 December 2011 and lists 28 practical recommendations intended to provide a ‘catalyst for change’ for shopkeepers, landlords, local councils and consumers. The Review presents some interesting analysis for the property industry as a whole to consider and which, if implemented, may help fuel a revival of Britain’s high streets and town centres. 

Proposals for the property industry:

  • Encouraging contracts of care and an emphasis on fairness between landlords and commercial tenants through promoting the Code for Leasing Business Premises 2007 could provide a gentle rebalancing of this relationship and better treatment in particular for small businesses.  The Report focuses several times on the role of the landlord as an investor in the future of the high street, with all the responsibility and accountability that entails and it is suggested that greater regulation and transparency could be achieved through the use of a public register of landlords.  Landlords should also be making a greater contribution to the existing Business Improvement Districts (BIDs) in order to boost even further the investments already made through the scheme by their commercial tenants.
  • The Review does not advocate an outright abolition of upward-only rent reviews which is clearly good news for landlords.  Instead it encourages landlords to consider other options for the review of rent, such as leases based on a turnover rent, to alleviate the financial pressures on businesses faced with crippling increases.  Landlords are also asked to seriously consider the acceptance of monthly rental payments rather than the more onerous quarterly demand.
  • Penalties are recommended for landlords that leave properties vacant and poorly maintained due to the impact on the value of neighbouring property and businesses.  This may take the form of, for example, the removal of empty property rates relief for landlords not actively marketing or financial sanctions based on the percentage of a portfolio that is vacant. Banks are named in the Report as particular landlord culprits in this area that should be encouraged to better manage or sell their vacant property assets.   
  • The promotion and enhancement of high streets needs to be balanced with the possibility of occupation for avoidance purposes only. The Report suggests that empowering local authorities to make ‘Empty Shop Management Orders’ would be time-efficient and an effective way of managing properties that have been left empty, although it does not suggest ways of funding such a scheme.  Similarly, the increased use of Compulsory Purchase Order powers is encouraged in order to focus on redevelopment of declining areas of the high street.  There has of course been recent critical press reports of landlords making a donations to a charity to encourage occupation of vacant space at a nil or low rent thereby passing on liability for business rates to the charity occupier which is able to claim relief.
  • The current use class system within the planning legislation is criticised due to the restrictions it places on the use of buildings and the difficulties faced in trying to get a use changed.  Relaxing the process could help to diversify our high streets and encourage new investment opportunities so long as limits are in place to ensure diversity is achieved in reality.  The ease with which  premises used for example as Banks and Building Societies, which have been disappearing from the high street, can be changed within class A2 to a betting shop is also flagged and a separate betting shop use class is called for in order to keep better control over the number of such shops and the areas in which they open.

The Report in general makes very interesting reading and points towards a positive future for the British retail industry.   The first government response to the Report was announced on 26 January 2012 by the Communities Secretary Eric Pickles,  A “Love Your Local Market” fortnight is planned for 23 June to 8 July 2012 during which the benefits of market trading will be promoted and stalls will be available to budding entrepreneurs for £10, in order for them to try out their business ideas.  Markets play a vital role in local communities, both socially and economically, and the scheme follows recommendations of the Report. However, criticism has already come from those who feel that it will not result in sustainable changes to town centres without government funding also being allocated. 

It remains to be seen how far the retail and property industries, and the government, will take the recommendations and how soon we start to see changes for the better.

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