Small traders suffer multiple injuries

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The Independent Online
THERE was a time when every town in Britain had its own character. Local shops were owned and run by local people, and every one was different.

Today most of our high streets look the same, now that the independent traders have been replaced by multiples such as WH Smith, Boots, The Body Shop and Next.

Two years ago we reported how Brian Askew - the last independent trader in Canterbury, Kent - went bankrupt, brought down by a combination of a crippling rent increase, the introduction of the uniform business rate (UBR) and the recession.

In 1979, when he opened his gifts and leather goods shop, his rent was pounds 23,000 per annum. Five years later it rose to pounds 42,000, but when his rent came up for review again in 1989 it was valued at pounds 135,000.

Why? Because by this time he was sandwiched between WH Smith, Benetton and Paperchase. The fact they were prepared to pay these staggering rents did not help his case.

It was happening all over the country: whenever a couple of retailers were so desperate to get into a town that they paid over the odds, everyone else's rent went up to the same price per square foot at the next review.

Mr Askew tried to negotiate with Hillier Parker, which was managing the property on behalf of the Rowntree Mackintosh pension fund, but it refused to do a deal to tide him through the recession.

As a result he was forced into receivership and the empty premises were taken over by squatters. It was months before the property managers got the squatters out and, unable to find anyone to pay the rent they were asking, they let the premises on a temporary licence.

Today the shop is occupied by the fashion chain Amazon. After six months rent free, it ended up paying pounds 35,000 a year less than Mr Askew.

Understandably, he is rather bitter. 'If they had offered me the same deal, I would probably still be there today,' he says.

There is no doubt that rents have fallen since the recession. The question is, have lessons been learned by the pension funds that own most of these properties and the estate agents that manage them?

Views on the subject differ enormously. 'If the independents can't afford to stay in the high street and compete with the multiples, maybe they should relocate to secondary locations,' says Alan Scott of Ian Scott & Co, the property management company.

'We've got too many shops in this country anyway. And in Mr Askew's case, leather goods are not in demand any more; they're too expensive.'

Hugh Radford at Hillier Parker says: 'If Mr Askew had placed his leasehold interest on the open market when his rent review was finalised in 1989, he could still have got a positive premium from a multiple. We weren't quite in recession then, and prime locations were still in demand.'

All of which implies that the independent traders had no options, bar selling up and giving up so the multiples could spread like rashes.

Mr Radford is sympathetic. 'It's not very fair, but when you're locked into a long lease, the rent can either stay the same or go up. There is no question of it coming down until the end of the lease, when it is negotiable.

'I don't know what the solution is; maybe we should copy the Americans and have shorter leases of three or five years, with rents based only on turnover.

'From an independent trader's point of view, it's got to be the way forward,' he says. 'The trouble is, most of the properties are owned by pension funds and insurance companies.

'They need to know when they tap into their computers that they can receive a figure of, say, pounds 250m of rent from their portfolio during the next financial year. If the rents were based on turnover, they wouldn't know what they were going to get until the year was over.'

Not only that, but if a landlord had a choice between an independent trader and a multiple, he would go for the established name.

'It's because of the uncertainty over income that the whole idea falls down,' says Mr Radford.

After battling on to save his business Mr Askew went bankrupt, by which time the country was deep in recession and retailers everywhere were asking for concessions.

'We had to make a judgement over whether he was strong enough to survive, or whether we should be looking for a good-quality covenant elsewhere. We believe we made the right decision,' says Mr Radford.

Paul Vockins, of the property agent Conrad Ritblat Sinclair Goldsmith, concedes that retailers were sometimes treated rather harshly.

'With the benefit of hindsight, in some cases - but by no means all - landlords would have behaved very differently to their tenants if they had known how bad the recession was going to be,' he says.

'On the other hand, retailers would have behaved very differently as well. They would have been far more cautious instead of rushing to acquire more premises in their eagerness for growth, because it was their momentum that drove the market up.'

While pension funds have a responsibility to ensure maximum profit, they wouldn't be allowed to invest in retail property at all if Mr Askew had his way. 'High rents are reflected in the price the consumer has to pay, and since most of the people who contribute to pension funds are consumers, it doesn't make sense,' he says.

Chris Phillips at Healey & Baker, the property agent, believes the answer lies in town centre management schemes, run as a partnership between the local authority, the landlords and the police.

There are 57 of these schemes at the moment, with plans to create them throughout the UK. 'The problem is, who will pay for them?', says Mr Phillips. 'Retailers think it should come from the UBR. Funds from central government would be a good starting point.

'Management schemes are a way of making sure that shopping centres strike a balance between multiples and independent retailers. A varied tenant mix will attract more consumers, and that way everybody benefits.'

(Photograph omitted)

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