There has obviously been a great deal of press recently with the announcement of the Network Rail arches being sold to the Blackstone Property Partners Telereal Trillium consortium for c. 1.5bn. This has elicited a reaction from all sorts of parties.
We have seen campaigning from Guardians of the Arches, looking to protect rights of the smaller businesses who are tenants in these spaces and trying to ensure rents do not skyrocket as a result of the new ownership. Simultaneously, Property Week have been very much downmarket about public reaction (especially the Labour Party’s support of Guardians of the Arches), to the transaction, as they feel it is a dampener on the property market.
Our view is the key to the whole discussion around the arches is actually part of a much wider picture and relates to the issues facing companies such as House of Fraser, Debenhams, John Lewis and other high street operators. This is really about affordability. If you ask any high street retailer what concerns them about rents, it’s simply an issue of affordability rather than the scale of rent.
So, we see the issue of the arches is almost a red herring – the only difference between an arch and a property unit of any sort whether it be retail, office or industrial is that the arches are subject to a six-month rolling break clause in case of emergency repairs and so on - but apart from that there is no real difference.
The key issue for us is communication. To ensure longevity, landlords and tenants need to be talking and that is why we advocate and spend so much time on lease restructuring to avoid companies facing head on conflicts in the forms of arbitration, CVAs or racked up surveying and legal costs. More than ever, landlords and tenants need to be in win-win partnerships otherwise both will ultimately fail. This has definitely never been more relevant than at a time than the current market where turnover and profitability are key to the success of all parties.
We applaud the work of Guardians of the Arches as it is about time we had somebody advocating for affordable locations - but the problem is much bigger than this - and we urge politicians to weigh in on this discussion to ensure landlords manage their estates responsibly for the long-term future of the entire market in these somewhat unsettling times.