Propertymark warns of downside of High Street Rental Auctions
The auctioneers’ wing of Propertymark is warning of what it calls the ‘unintended consequences’ of High Street Rental Auctions powers given to local councils.
The Ministry of Housing, Communities, and Local Government (MHLCG) has confirmed that more vacant shops and other empty premises will be transformed as councils use their new powers to revive high streets throughout England.
High Street Rental Auctions powers, which provide local councils the power to auction off leases for commercial properties that have been vacant for a considerable period, will be implemented by eight more local councils that have committed to this programme.
Councils include Barnsley, Broxtowe, Camden, Hillingdon, Lichfield, North Northamptonshire, North Somerset and Westminster. This brings the total number of councils signed up to the programme to 11, as Bassetlaw, Darlington and Mansfield councils became Early Adopters in November to set an example to other councils.
Propertymark supports the scheme in principle but when it responded to the public consultation on the measures back in July 2023, it recommended that local authorities should have the power to design and implement High Street Rental Auctions as they see fit depending on their area.
It also encouraged councils to guarantee that properties subject to a High Street Rental Auction have a reserve price to safeguard market prices and to ensure the price covers the costs of any mortgages.
Michael Sears, NAEA Propertymark Commercial Advisory Panel member, comments: “The UK Government needs to consider the main unintended consequence of these measures. In areas where there are high numbers of vacancies, by auctioning off property where supply outstrips demand, this could only result in rents being driven down further, and investment in town centres where returns would be low would cease. The effect of this would be negative towards regeneration and inward investment.
“When a commercial rent review is due, are the results of high street auctions going to be used as evidence of market price by tenants’ surveyors? In which case commercial property investment and lending on commercial property could become problematic, given the heightened risk. There needs to be protections in place to avoid this downward spiral.”
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