It’s no secret that high
streets are being obliterated. Huge high street brands are closing faster than journalists can write articles about them. This has been inevitable for a while. Retailers and casual dining chains have been drowning their customers in monopolised mediocrity for decades through complacency and greed.
They have forgotten the fundamentals. In the new world of online shopping, consumers no longer tolerate lazy, rude and entitled service; expensive products; and relative inconvenience.
And where this wasn’t the reason for a retailers downfall, their executives instead leveraged their companies to toxic levels through rapid debt fuelled expansion and questionable accounting practices that incentivised this behaviour and rewarded it with huge bonuses.
Right now is the best opportunity for a wholesale reset. Let’s clear the decks, give room on the high street to new businesses that go back to the basics of good service, high quality, well priced and differentiated products that are in demand. High streets need the businesses that realise they don’t have a right to continue existing unless they give customers an experience that cannot be found online.
The high street obliteration is reversible, but it will take decisive action and an injection of realism and cooperation between the federal government, local governments, landlords and banks.
Federal government has the easiest job. They need to enact a commercial leasing framework where the transaction costs are much lower. Standardised leases with standardised wording that apply to all leases across the country would negate the need for expensive lawyers on both sides of the transaction. Leases need to be so simple that estate agents or surveyors simply insert the lease length, security bond amount, any special terms and the property plans. That’s it. If that sounds impossible, then look to Australia where it has been like that for decades.
In addition, the process for lodging a lease with the Land Registry needs to move from the 14th century to the 21st. Does online submissions and payments [that are available to anyone] really seem so impossible in 2020? Surely not. But if that relatively simple feat cannot be managed by standardising all leases, then just make it the responsibility of the letting agent to submit the applications – newly standardised leases will not have any complexity that agents need a law degree to navigate.
With these two simple changes, we have now reduced the ingoing costs of a new lease from thousands of pounds of lawyers fees on either side, to the agent’s fees and the negligible Land Registry lodgement fee. Immediately, commercial leases become more accessible to innovators, while at the same time reducing the risk for a landlord to take a gamble on an unproven tenant. At the moment, landlords rightly feel they can’t take these risks because they also incur substantial lawyers fees every time the lease changes. If those high costs were abolished then landlords would be incentivised to take risks on new businesses.
The federal government also needs to simplify the property change of use procedures. Should it really take 12 weeks to approve a use change from a cafe to a retail space (or reverse)? Local governments extend the time a shopfront stays empty by taking an unnecessarily long amount of time to approve a use change that would otherwise see the property filled immediately. Surely some applications can be approved online immediately if it meets obvious criteria, while applications that meet a second set of criteria are approved in say, less than two weeks? Then any applications that need careful consideration can still go through the current process.
By making this change, empty shops are kept to a minimum and it is easier for landlords and new businesses to agree leases because they do not have the uncertainty of a use change application hanging over their decision making.
And lastly, the federal government needs to abolish all high street business rates. It needs to trust that revenue will come back to it in the form of PAYG and corporation taxes. Either way, the government needs to stop complaining about the online behemoths killing the high street, and instead accept it is happening and remove all barriers to competing against them – and that includes high street business rates. At the moment business rates create the inverse incentive to not open a high street store and instead move your business online.
The best argument against doing this is that rents will increase to fill the void of the business rates. Maybe, but at the moment rents are already at an unsustainable peak for almost all businesses and you cannot ignore the enormous list of brick and mortar retailers closing. Economics 101 say that if demand is decreasing because there are fewer businesses then supply has to lower its costs, meaning that if rates were abolished for high streets, then rent will go down on the high streets where that is needed, not up.