Stores across the UK are gearing up to what still amounts to their busiest period of the year. But what are realistic expectation levels of high streets and shopping centres amidst some fragile consumer confidence, rising costs and increased online shopping habits?
With many high-profile retail brands struggling, this is putting a further strain on commercial property owners and deterring some investors. That being said, there is evidence that the high street is evolving and exploring different kinds of consumer-focused opportunities, meaning that it’s not all bad news for the commercial sector.
According to research from the Local Data Company (LDC) and PwC, there was a slight increase in store openings in the first half of 2019 compared with last year (from 1,569 in 2018 to 1,634 in 2019). A figure which suggests some renewed optimism amongst high street operators. Interestingly, seven of the top 10 sectors for store openings also featured amongst the top 10 sectors for closures, such as fashion. Takeaways, gyms and specialist vaping shops were some categories that saw the largest increases in store openings with analysts suggesting that this demonstrates the high street’s move away from traditional retailing. An average of 16 stores a day were reported to have closed between January and June, as restructurings and the online migration of shopping and services continue to hit the high street, in what continues to be a testing retail climate. However, there is commercial activity beyond the high street, although this too comes with its own fair share of challenges.
The Financial Intermediary & Broker Association (FIBA) recently urged commercial finance brokers to listen to the warnings in the Bank of England’s latest quarterly credit conditions survey about lenders cutting access to funding in Q4 and beyond. Within this story, Adam Tyler – FIBA’s executive chairman – said he believed that finance specialists need to consider positive moves they can make to offset any loss of funding via their favoured lenders.
He added: “The BoE warning should not be taken as a guarantee that funding will become tighter, but we are urging our members to look beyond the lenders they tend to favour at the wider range of funding options that are available on our panel, which was highlighted in my report to the Treasury Select Committee on Access to Finance.”
This is a prudent message in the current economic climate and it’s important to point out that commercial finance remains available through intermediary channels if the right relationships are in place with specialists who are willing to look outside the box. Here at F4B, we recently had a case where a client was looking to refinance a commercial property – a 33,000 sq ft office in Clerkenwell, London – to assist with the acquisition of another property. The client intended to develop the property to enhance its rental potential and, as an exit, is looking to obtain long term finance with their bank once the property is developed and fully let. This amounted to a £21 million refinancing deal. On this deal we worked with leading specialist real estate investor Octopus Real Estate, a company we had previous placed business with but not for quite some time.
We work with many commercial finance specialists but this case in question was a hugely complex one which required a bespoke, customer focused financing solution. Octopus Real Estate was the best fit for this particular deal in this particular location and we knew this because of a long-standing relationship which has evolved over the years. A factor which demonstrates the valuable of cultivating these types of relationships in the modern mortgage market.
When it comes to the retail market, the winners will always be the companies that know exactly what their consumers want and give it to them. And this is also the case when it comes to accessing the right kinds of commercial finance.
Steve Swyny is head of sales at F4B