As Larry Elliott has noted in the Guardian this morning, the September rent payment day (businesses usually pay their rent quarterly) might be particularly stressful for many retailers. He quotes Helen Dickinson, the British Retail Consortium’s chief executive, saying:
“With rents accumulating and the September quarter payment date fast approaching, many retailers are hanging on by a thread. Unless businesses and government can successfully persuade office workers back into city and town centres, some high street retailers will be unable to afford their fixed costs. Government will need to act fast or September will see more shops close and more job losses realised.”
I admit that I can take issue on several grounds.
The first is that this is not just a large city issue. I have only to go into the centre of the very small city (of less than 20,000 people, but a city, nonetheless) where I live to see that many, if not most, retailers are suffering a reduction in footfall, and that the viability of many must be at risk as a result. To presume in that case that this is just a large city issue relating to the return to work appears to be wrong.
So too is it wrong to think that this is going to change any time soon. Coronavirus cases are rising. R must be above 1. Like it or not, many people who have an option are not going to be returning to work or shopping, come to that, any time soon.
And in that case the ‘return to work’ is not the issue here. The cost structure of retailing is that issue. And what is wrong with that cost structure is rents.
I have written more than I realised on issues relating to coronavirus and rent, as a Google search showed. I will make no apology for reiterating my point now. That point is that it is not a lack of custom that is killing retail business right now. Nor is it staff inefficiency. It is rents that are killing businesses at present.
Helen Dickinson Was right to mention this issue. Rent days are always crunch time for retail business, when cash flow is squeezed to the limit. There will be many who if they manage this quarter won’t manage the next as by then additional deferred tax payments will also be looming.
My point is a simple one. Cities can survive this crisis. So too, to some degree, can city centre employment. But city centre rents can’t. Either landlords smell the absence of coffee now, and begin to reduce rents; or the government needs to impose rent reductions on them, compulsorily, or landlords can force their tenants out and then wait forever for another tenant to come along offering vastly reduced rent, come what may. Whichever the option landlords are going to, and need to, lose heavily. There are just better and worse ways for them to do so.
None of this is rocket science. Rent is not a payment due to land after all. It us payment to people who for, whatever reason, control a scarce resource and who can as a result skim a part of the income of those who work for a living for the right to occupy that scarce land.
If that land ceases to be scarce, and that is clearly what is going to happen, rents will collapse, come what may. The only choice in the matter is whether or not the reductions in rents are going to happen before or after landlords force vast numbers of people into unemployment and gut our city centres in the process.
Based on precedent, I strongly suspect that they will go for the mass destruction option. But if they do I sincerely hope rent reform will feature very high in future political agendas. Destroying wellbeing for the sake of landlords should not happen in the twenty first century. But it is very likely that it will, and the political rebound has to be sharp, and very effective.