MISFIT
Property Puzzlement A
great deal of kerfuffle locally because a small health food shop, the sort that sells lotions and potions not available from your GP, is closing down on account of its lease expiring and the landlord upping the rent. Its supporters protest it is a local institution, a sort
of community centre where people would drop in to share their problems with the lovely lady shopkeeper. The landlord has offered a new lease at a rent which the shop cannot
pay, and in doing so has incurred the wrath of more vocal of the local citizenry. Everyone is on the side of the nice lady and no-one supports the wicked landlord who has extended the lease by three months to give the retailer a chance to raise some extra cash or find new premises. By her own admission the shop is losing money, so as the business has been going for twenty-five years I can only surmise that it used to be profitable, or perhaps it has been supported by the owner’s personal fortune or maybe friends and family chipped in to keep it afloat from time to time and they have run out of cash or patience. I am puzzled about the protestors. They never say whether they bought
anything from the shop, because a shop is not there to sell stuff, is it? Perhaps they lashed out on a small pot of hand cream or some sunflower seeds occasionally, but not enough to provide a living for the proprietor. Surely the thing they should do is go in and buy lots of stuff from the shop, thus making it profitable enough to pay the increased rent. Problem solved. Well, that’s the theory, but as we know when a shop closes people who have never been inside it, or even near it, emerge from the woodwork waving banners and getting up petitions. Easier and cheaper, and it makes them feel good at no cost. Another solution to the health shop lady’s
When it comes to commercial property it seems there is a fixed price
whether anyone wants to pay it or not. Who fixes that price? The Great Realtor in the Sky? Valuers who are Professional People totally unconnected with any property business? Whoever it is, it isn’t the market. Further research revealed what may be the truth. The empty shop
stands on its owner’s balance sheet at an inflated value based on the rent it could command compared with what is being asked for similar shops in the vicinity, even if they are empty and getting zero rent. All perfectly reasonable. Actually this is fairyland economics. They are really giving an inflated value to their stock which is 1) stupid and 2) actually illegal. If you try very hard you can go to prison for it; it is called false accounting. By the way, local authorities connive at this because rateable values are based on the same valuation which must be a nice little earner for them. It is stupid because all they are doing is putting off the evil day when
they will have to admit their stock is worthless and they are bankrupt. As long as they can keep their cashflow going and their creditors happy they appear to be doing well, but sooner or later the evil day will come. This is what caused the slump in the housing market in the States which set off the current financial crisis. There came a point where everyone realised the homebuyers had not got the money.
difficulties would surely be to tell the landlord where he can put his shiny new lease and move off to one of the many empty shops I see round and about, some of which have been vacant for quite some time. As no-one seems to want to take them I assumed they will be cheap, since their owners would surely like to see at least some return on their assets. This is where I am really baffled. The law of supply and demand doesn’t
Funny that. I was bought up to believe that the price of anything was what a willing buyer would pay. I once tested this economic theory by stocking a line of shoes that no-one wanted to buy. In the end I had to reduce the price to the point where people with eyesight problems could be talked into parting with their money. It hurt, but I could see no other way of getting even a bit of my investment back.
The trouble is there is always someone who will take an empty unit at
seem to apply to retail property. The empty shops are just as dear as the one the lady is being forced out of. Why? I decided to do some research and asked an estate agent. He explained that property people have to look to the long term. If they let out an empty shop at a low rent then they have egg on their faces when things get better and all their fellow landlords are getting more. Funny that. I was bought up to believe that the price of anything was what a willing buyer would pay. I once tested this economic theory by stocking a line of shoes that no-one wanted to buy. In the end I had to reduce the price to the point where people with eyesight problems could be talked into parting with their money. It hurt, but I could see no other way of getting even a bit of my investment back.
12 • FOOTWEAR TODAY • JANUARY 2012
an inflated price in the forlorn hope of making a go of it, obeying another economic law that postulates: There is a Mug born every Minute. The landlords point to such cases to justify their policy, but it is killing off the retail trade as a whole. If it were not for charity shops a lot of high streets would be derelict. Maybe that is how things should be, and the future will be out of town supermarkets selling nearly everything and the internet the rest, but somehow I doubt it. To return to the health food lady, she should thank her supporters and ask them to go away, and then take a long hard look at her business. Can it be run better? Can she stock more profitable lines? Should she advertise? If none of these apply then she should sell up and get out. You can’t buck the market, even if the market is rigged.
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