Shops under the hammer
High Street Rental Auctions (HSRAs) will allow local leaders to take control of high street shops that have been empty for at least a year and auction off a rental lease for up to five years. There will be no reserve price during the auction process, giving local businesses and community groups the chance to occupy space on the high street at a competitive market rate.
By facilitating access to unused properties for tenants who intend to use them, it is hoped that councils can combat a range of issues linked to prolonged high street emptiness, such as low footfall leading to struggling businesses, increased unemployment, and anti-social behaviour.
Get more details from the UK Government’s response to the technical consultation →
MEES must be met
To reduce the burden on landlords, it was suggested in the consultation that properties leased under HSRAs would not be required to meet the current legal obligation to have an Energy Performance Certificate of level E and (proposed) future requirements for levels C and B.
Respondents were concerned this would lead to confusion and possibly be misused by unscrupulous property owners to avoid upgrade costs, and as a result, this proposal has been dropped.
Encouraging early adopters
The UK Government is initiating a ‘trailblazer’ programme to get HSRAs operating as quickly as possible, as there are many communities who are keen to implement the new powers quickly.
The new law will be laid in Parliament in the coming weeks with the first auctions expected to take place in September 2024 .
Accelerating regeneration
Alongside the regeneration of commercial premises the High Street Accelerators pilot programme, which was announced in December 2023, will give ten areas a share of £5 million to plant new trees, green walls, green pocket spaces, and enhance existing parks, plus £500,000 to encourage residents to make use of the town centre.
Five high streets in the North West, three in Yorkshire and Humberside, one in the West Midlands, and one in the East of England will receive money from the fund, which could be rolled out more widely if it proves successful.
Pieces of the bigger picture
Both HSRAs and the High Street Accelerators pilot are commitments made in the UK Government’s 2023 Anti-Social Behaviour Action Plan, which feeds into the £15 billion UK-wide levelling up package which aims to reduce geographical disparities across a range of measures including housing, employment, and digital connectivity.
I welcome this new incentive, providing certain safeguards are in place and local authorities implement this proposal with sympathy and balance, accounting for the reality of the commercial market in the area they operate within.
The safeguard I would like to see is a mechanism in place that prevents auctions like this driving rents down. We need to avoid listing several properties at once where the market is poor, and this auction process not achieving close to market rent, otherwise investment in commercial property would be negatively affected and investors would exit the market, affecting economic outlook.
In certain towns in the North where the commercial property market has poor take up and high vacancy rates, this could be disastrous and further negatively affect the market. Potential tenants would wait until the next vacant property goes to auction and not take up a lease on existing stock. Therefore, the answer is introducing the safeguard that these auctions must come close to if not market at market rent as a reserve.
