Rent to prosper – or not?

There was an interesting item buried in the ‘Next’ retailer’s annual report (click to read it!)

It expresses some optimism on their shop rents. Their leases run on average for only six years (which actually seems short to me) but at a 25% reduction on their current costed basis.

That is very good news for them and for bricks and mortar retailing.

But of course less good news for the pension companies that often own these premises (even if we know that pensions are not available only by investment).

I remain as gobsmacked as I was to the response to to my own lease renewal . At last a forward projection of income is based on reality rather than sand – in the good times everyone is happy. In the bad, our incoherent and unfair leasing system endeavours to get someone else to be liable for the downturn in the economy – something which has no logic.

I used to think that Tesco had cleverly – even logically – played the system for some time, but FT Alphaville thinks otherwise. Although I do still consider that any leasor would be nuts to mess with our largest retailer, Tesco.

Of course, although I’m not a fan of either Next or Tesco, they all still have enormous business rates and, I think it is a governmental dereliction of duty that Tesco and Sainsbury (and indeed Next) are required by our government to pay all these business rates (and usually UK registered tax) while Amazon doesn’t have to bother.

It is of course not the tax revenue that is important – but actually the competitive fairness of trading. Even with these enormous companies we have lost the level playing field.

In effect, through masterful sightlesness, this government thus seems to be looking to downgrade British companies.

Leaving aside all the rest of their incompetence, why on earth would any government do that?

Comments

  1. Geoff -

    Hi Peter, one town fighting back.
    “Call centres and warehouses are the modern pits,” says Horne. “But it doesn’t mean that those people in there aren’t really creative. It’s just a job.” And what does she make of the town’s empty former chain stores? “I think that’s great,” she says, as she breaks into a smile. “I’m anti-capitalist, really. I don’t really think we need the stuff we buy. I think we’ll find new ways of occupying the space and the council need people like us to do that.”
    https://www.theguardian.com/uk-news/2018/oct/11/amazon-v-the-high-street-how-doncaster-is-fighting-back

  2. Peter May -

    Thanks for the link. I agree we probably buy too much stuff – but giving the revenue to Amazon rather than even Tesco is crazy….

    1. Andrew (Andy) Crow -

      “…..but giving the revenue to Amazon rather than even Tesco is crazy….”

      I give as little as possible to Tesco. Have done so for years. I don’t regard them as in any way benign. Quite the contrary.

      Amazon is another matter entirely. They don’t get much from me either.

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