From the BBC:
More than 300 former Woolworths stores are still empty a year and a half after the chain collapsed. The Local Data Company, which provides information on the retail sector, says this represents some 40% of the once-national chain..
PS, can anybody explain this joke: "Wooden spoons are great. You can either use them to prepare food. Or, if you can't be bothered with that, just write a number on one and walk into a pub…"?
Monday, 23 August 2010
Why don't they just drop the rent a bit?
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12 comments:
In some pubs, once you order your food at the bar, you are given a spoon with a number on it to indicate your order number to the waitres...
Having just moved back to Dorset I can report that the famous(because it had its 15 minutes of TV fame) Wellworths appears to be doing well.
http://en.wikipedia.org/wiki/Wellworths_%28GB%29
Not sure if their landlord reduced the rent or not.
Simple: If the stupid landlord dropped the rent there, they would lose their monopoly hold on unearned incomes from the remainder of their portfolio along the High Street. e.g.
10 properties
Monopoly rent £50k (500)
Market rent £30k (300)
A monopoly vacancy in one tenancy only loses the LL 50k. Free market loses the LL 200k. This is all true and observed, in fact.
Get it yet? Or are you still backing landlord-ism or aspiring to it?
Anyone here heard or bothered to look up the Upward Only Rental Review process. Its so full of fraud it hurts.
But again, we keep voting for this stuff. It pains everyone. Stupid. All of us.
In the town I've been talking about the Woolworth's went on the market for a million and was sold for possibly a third of that.This has been used to bludgeon the other landlords who are not doing very well.In fact some of them are being mucked about the tenants who withhold rent until expensive repairs are done (They carry on trading mind: nobody's going to put them out.)
"some of them are being mucked about the tenants who withhold rent until expensive repairs are done"
This is quite good to hear. In the large part of a biz cycle the boot is very much on the other foot, pretty much mafia style. Can you see how the idea of war fits perfectly here? The tenants are getting revenge. Stupidly.
Also most leases are repairing. So, believe it or not, the tenant must repair the Capital that he is renting as well as pay economic rent for the land. Quite amazing! We keep voting for this stupidity.
Further to Robin's comments.
Stupid fiscal rules collect taxes only if a stream of income is generated by a property.
The owners of the land under the unlet property can afford to wait for an eventual let at their rates because it costs them nothing (or next to nothing) to keep the premises empty.
Solution: Site Value Levy: Land "owners" should pay the ground rent to the community whether the plot is generating an income or not.
@ RS
I am not sure about all this war and mafia imagery.
I would have thought that, since a lot of the dicussion on this site lately has been about empty shops , landlords are looking for tenants rather than the other way around,with obvious consequences for the balance of power between them.
By contrast I can just about remember a time when, as soon as a shop became vacant,prospective tenants would compete to take on the lease.Those days are long gone.
I have known tenants refuse to pay any rent and still go out of business.
(Not all leases impose full repairing clauses on tenants.)
@janos
Owners pay business rates on empty property as a result of the 2007 Rating (Empty property ) Act.
PP, ta, I suspected as much, but that isn't funny in the slightest.
SF, glad to hear it!
RS, that only works if one landlord owns all ten properties. If ten landlords own one each, this doesn't happen (even assuming the demand curve to be that steep).
DBC, exactly, there are good landlords and bad landlords, just as there are good tenants and bad tenants.
Janos - nail, head! In RS's monopoly example, the council could (in all blue eyed innocence) levy LVT on all ten properties assuming that the £50k is market rent, i.e. additional LVT = £200k per annum.
Seeing as the monopoly landlord only gets £150k more rent (9 x £50k compared to 10 x £30k) but would pay extra £200k in LVT, the problem simply doesn't arise.
DBC, exactly. Reducing vacant ptoperty discounts was one of the few good things the last government ever did :-)
In any event. don't forget Ricardo's law of rent - landlords do disproportionately well in the good times but disproportionately badly in the bad times.
10 properties
Monopoly rent £50k (500)
Market rent £30k (300)
Er, the "monopoly" rent is the market rent, for that particular bit of the market at least. You can't say that in town X (with competing landlords) the rent is £30k, therefore in town Y (with one landlord) it should be £30k, because town X isn't town Y. If town X is next to town Y, then the landlord in town Y will find himself losing tenants to town X.
I don't have much experience of dealing with monopoly landlords, but the little I have points in the other direction with the landlord reducing rents to get property let and to allow for recessionary times.
MW Most landlords DO own all 10 properties. Why so much denial. We are all grown men are we not?
DBC good points. But I use imagery because its the best way to illustrate utterly dumb real life behaviour to people to whom's minds it repels so deeply. This cannot be done with theory nor facts evidently.
DBC2: Those days may be gone for now. But they will return when the next biz cycle kicks off. Actually I very recently have primary evidence for tenants bidding a monopoly price for vacancies already! 50% above the market value. 50%!!! Probably due to the fake recovery. The other thing to consider is most indy traders are over enthusiastic. They ignore a price they cannot really afford in the hope they can work hard enough to pay that rent. In the end most basically become slaves or go bankrupt. And the big multiples take over the town due to buying power given only by concentration of capital not enterprise.
Bay: don't understand you logic sorry. Your experience may well be true. But it may not be typical. In any case everyone loses in the end. Just some less than others. And a greater mass who are not even part of the deal!
MW Landlords always do better absolutely, all the time though. They are always the last man standing. Can ride the storm. So pick up the pieces for a song. And start again with an ever greater advantage.
RS: " Landlords always do better absolutely, all the time"
That is simply not true; they win more in the good times and lose more in the bad times. It is probably the case that their extra gains outweight their extra losses in the long run, but this is all stuff that LVT (i.e. reforming Business Rates) would sort out.
And how do you mean "they can pick up pieces for a song"? When prices are low, anybody can pick up pieces for a song (and become a landlord - thus perpetuating the cycle).
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