The recent wave of administrations across the UK retail sector could cost the UK commercial property market a whopping £393 million. This is according to worldwide real estate performance analysis organisation, Investment Property Databank (IPD).
As predicted by many commercial property experts, we have seen a number of closures, including a number of big name retail chains, following the due date for payment of commercial property quarterly rent.
The last few weeks have seen organisations such as Focus DIY, Habitat, Jane Norman, Haldanes, Moben Kitchens, Dolphin Bathrooms and TJ Hughes fall into the hands of the liquidators. A number of these fallen companies will have held long term leases, making their demise doubly painful for their commercial property landlords.
According to the IPD study, Focus DIY had an average outstanding lease commitment of 12.4 years and would have paid over £231 million in rent over the period. Making the Focus DIY downfall an alarming blow for the health of the UK commercial property market.
The research, by IPD found that the total annual rental income for commercial property landlords across the UK, currently lies at a cool £7.2 billion.
Malcolm Hunt, director and head of UK and Ireland client services at IPD said: ‘The total annual cost to landlords of these administrations could be as high as £35.8 million based on IPD data. Obviously some of these costs can be mitigated through re-letting, as was found following the demise of Woolworths and MFI…Only 16 percent of property funds could lose more than one percent of their income stream as a result of these corporate failures. The two most important retailers affected are Focus DIY and TJ Hughes with potential total impacts over the lifetime of their leases of up to £231m and £94m respectively.’
Despite this bad news, those involved with the commercial property market are hoping we will see a growth in the UKs economy, which will help in letting any vacant commercial property space.
