New laws could cut costs for office and shop rentals

The festive shopping season might be round the corner, but the UK high street is in a sorry state to greet it. With lots of popular chains having fallen into administration, many shops and offices lay empty, blighting the local landscape and worsening already low footfall. 

That could be about to change. From next Monday, local councils will be awarded the ‘right to rent’ under new laws that will allow them to rent out long-term empty commercial properties without first needing to obtain permission from the owner or landlord.

The scheme forms part of a package of levelling up reforms that the government is hoping will serve to revitalise local high streets and kickstart the UK’s economic recovery.

What is the ‘right to rent’?

Known as High Street Rental Auctions (HSRAs), the new rental scheme was first announced by the previous Conservative government back in May. With the plans being upheld by the new Labour government, the new powers will be granted on 2 December.

All commercial properties which are located on a designated high street and have been empty for over a year will be eligible for takeover. That includes:

• Shops
• Offices
• Restaurants
• Bars
• Community halls

Under the new laws, local authorities will be able to step in and auction off a new rental lease for the above premises between one and five years. 

According to the government, the move will stop “disengaged” landlords from sitting on empty properties for more than 365 days in a 24-month period.

Confirming the news in November, business secretary Jonathan Reynolds said: “We promised to lift the shutters on our great British high streets and we’re delivering real action across the board, to boost jobs, opportunities and get the economy growing.”

One in seven shops now empty

One provision outlined in the new laws is that the property’s occupation will be “beneficial to the local economy”. According to analysis by the Local Data Company, one in seven shops on UK high streets currently sits empty, representing wasted space for towns.

High street businesses are facing significant challenges due to shifts in consumer behaviour, economic pressures, and changing business models (not helped by dreary UK weather). 

The rising cost of living is a major cause, but not the only one. Limited disposable income has undoubtedly reduced consumer spending, but consumers are also now prioritising experiences over goods, seeking out places that offer social activities alongside shopping.

The problem is self-perpetuating. As more shop windows are replaced by shutters, Brits are even more deterred from transactional retail. The reduced foot traffic has hit profit margins, resulting in 2,300 stores closing in the first half of this year alone.

Labour had pledged to tackle the problems by reforming business rates (taxes charged on commercial properties) for SMEs. Last week, it published draft legislation that hinted it will aim to completely cut business rates for retail hospitality and leisure properties from 2026.

High (street) hopes

Until that occasion, the burden of high business rates, particularly for small and independent retailers, remains a significant challenge both for business owners and local councils. 

As an interim solution, HSRAs could offer the opportunity for entrepreneurs to occupy space on the high street at a competitive rate. New or growing businesses could base themselves in cheaper, local offices or shops instead of throwing their money at expensive city locations.

Commuter towns also represent a larger chunk of the market now that more employees are working from home rather than city centres. That’s the reason that Esquires Coffee, a fast-growing chain in the UK, this week outlined plans to target out-of-town suburban sites.

Aiden Keegan, chief executive of Esquires in the UK, said: “We don’t particularly want to be in central business districts or city centres. We’re happier in the suburbs where people working from home want to visit a cafe to work”.

Going once…

It is unclear how many councils plan to take advantage of the HSRA scheme. Statistics suggest that they will have plenty of vacant properties to choose from. Founders and residents will be hoping their local authority places its bids wisely come December 2.

Commenting on the start of the scheme, Local Growth Minister Alex Norris said: “High streets are the beating heart of our communities. But for too long, too many have been neglected, with more and more empty lots and boarded up shopfronts.”

“We are giving local councils the tools to take back control. HRSAs will put local communities first, re-energising town centres and driving local opportunities and growth.”