Sunday 3 May 2020

They own land! Give them money!

It had to happen, I suppose...

From the FT:

In a letter to Rishi Sunak, the chancellor, a coalition of the UK’s biggest retail chains and property owners warned that “many viable companies” will file for administration if the government does not intervene further, causing job losses and a “devastating impact” on high streets.

“We have come together, as voices of both commercial tenants and landlords, to propose that the government introduces a scheme of rental support for the space that has in effect been furloughed, just as staff have been,” said the letter, from the chiefs of the British Retail Consortium and the British Property Federation...

The two industries want the government to support a “furloughed space grant scheme” where the state would cover the fixed costs of businesses that have experienced dramatic falls in turnover. Similar schemes have been set up in Denmark and other European countries.

The groups have proposed a sliding scale of partial payments to cover property costs, which would still leave some of the burden on the tenant and landlord.

8 comments:

Piotr Wasik said...

"commercial tenants" want it? strange.

Bayard said...

Why do I get the feeling that one of the purposes of the "Nightingale Hospitals" was to provide some income for the poor starving landlords of the venues they have been set up in?

Ralph Musgrave said...

So what if retail chains do "file for administration"? If those chains look like good bets in the long run, someone will buy them up at a bargain basement price, do a deal with landlords, and the chains will spring back into action come the recovery.

As for the chains which don't look like a long term bet, what do Sunak and the rest of the economically illiterate Westminister establishment think will happen to relevant stores? Do they think they'll vanish into thin air or something?

What would actually happen is that landlords would be desperate for new tennants, would find some, and lo and behold a new retail outlet appears.

Lola said...

RM. Exactly. I might be looking for an office move in the next 18 months. I am looking forward to much lower rents...

Mark Wadsworth said...

PW, because they'd like to share the cost with other taxpayers.

B, maybe, maybe not. But given the scare stories in Italy, it seemed like a sensible thing to do at the time.

RM, you're asking the wrong questions. The real questions are:
1. Why should businesses have to pay rent for premises they are legally prohibited from using?*
2. Why should the taxpayer bail out anybody, apart from a subsistence level UBI?

If the govt declared a rent free (and interest-free and mortgage repayment-free) period for as long as the lock down lasts, then everything goes into hibernation and doesn't need bail outs. Nobody's paying anybody anything. Then when this is over, we can pick up where we left off.

* Let's imagine, pub has order with brewery for delivery of 5 barrels of beer per week. Govt shuts all pubs. Can the brewery just dump five barrels outside the pub each week and expect payment?

L, let us know how it goes!

mombers said...

If they have to bail out businesses instead of UBI, they should just pay landlords for their costs, i.e. maintenance and depreciation on buildings. The location is not a cost to the landlord even though they are allowed to charge for it.
Fairly easy to work out. Take rebuild cost on insurance + work out an annual depreciation sum. Add in any ongoing legitimate running costs, e.g. insurance, service charge for actual services rendered, boom. Technically the service charge should be adjusted to reflect anything not being done during shutdown, e.g. trash collection

Mark Wadsworth said...

M, fair enough, but actual running costs of an office building are negligible. £5 per sq foot?

Robin Smith said...

Why not just change planning consent, for residential. Then see how that plays out