There is more activity in the second-hand high street market than ever before, says a leading property expert. Simon Hall, an associate at Fleurets, believes that the increasing numbers of units being sold on is creating a new market sector.
The majority of sites hitting the market are from national operators which have been suffering from tough trading conditions, increased competition and an economic slowdown, he argues.
Over the past year operators such as Old Monk, Mustard, Po Na Na and Balaclava have been forced into receivership while more recently Springwood Leisure revealed it has been losing money because of the large number of properties it is waiting to sell.
Mr Hall said running a managed operation has become so expensive for operators that they are being forced to sell sites which are now underperforming.
He argued that while managed houses with trading levels of £5,000 per week used to be profitable, some managed houses now need to take £15,000 per week to break even.
"We have sold approximately 100 high street units, either individually or in packages, over the course of the last 12 to 18 months or so. We also currently have over 50 on the market openly or confidentially," he said.
"Increases in red tape have led to higher management costs. We have seen insurance premium increases, national insurance rises, increases in the minimum wage, working time directives and disability legislation. Almost every cost item has increased which has led to reduced profitability of these managed house units."
Mr Hall said regional companies, individuals and new entrepreneurs are acquiring the units that national operators are looking to sell.
They have the opportunity to buy existing operations because the national players are not in the market for these sites. Because there is a large supply of properties and limited demand, prices are low.
"The value of high street units has fallen by anything between 20 per cent and 90 per cent of their value a couple of years ago," said Mr Hall.
But it's not all plain sailing for those wanting to purchase, he added.
With the majority of high street operations being run by major plc companies landlords are guaranteed their rental income and investment value.
They will be concerned about whether the new tenant will be able to afford the rent and whether they will reinvest in the site to maintain the levels of business.
Mr Hall said prospective tenants will need to gain the landlord's consent by providing copies of company accounts, a business plan, references and offering rent upfront.
Mr Hall was speaking at Fleurets annual conference called "Licensed property - no sign of stability."
Over the past year several operators, including Brannigans-owner Mustard, have gone into receivership
Landlord consent
The following documents may help gain landlord consent:
- Company accounts
- Information about the company and key members of staff
- Details of any other assets they may hold
- A business plan indicating development proposals and operational standards
- References
- Personal guarantee, particularly in the case of a limited company.
Related articles:
Receivers take charge at Balaclava Pub Company (2 October 2003)
Banks call time on Po Na Na (6 May 2003)
Mustard bar group is Branni-gone (20 November 2002)
Old Monk Company on brink of collapse (19 September 2002)
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