The ‘unintended consequences’ of high street rental auction powers given to local councils must be scrutinised closely by the UK Government, the NAEA Propertymark Commercial Advisory Panel has urged.
The Ministry of Housing, Communities, and Local Government (MHLCG) has confirmed that more vacant shops and other empty premises will be transformed as councils use new powers to revive high streets throughout England, which is part of the UK Government’s growth mission.
Propertymark supports the scheme, but when the professional body responded to the public consultation on the measures back in July 2023, they recommended that local authorities should have the power to design and implement high street rental auctions as they see fit depending on their area.
It also encouraged councils to guarantee that properties subject to a high street rental auction have a reserve price to safeguard market prices and to ensure the price covers the costs of any mortgages.
Commenting NAEA Propertymark Commercial Advisory Panel member Michael Sears said: “The UK Government needs to consider the main unintended consequence of these measures. In areas where there are high numbers of vacancies, by auctioning off property where supply outstrips demand, this could only result in rents being driven down further, and investment in town centres where returns would be low would cease. The effect of this would be negative towards regeneration and inward investment.
He added: “When a commercial rent review is due, are the results of high street auctions going to be used as evidence of market price by tenants’ surveyors? In which case commercial property investment and lending on commercial property could become problematic, given the heightened risk. There needs to be protections in place to avoid this downward spiral.”
