Cathy Hughes

A Message from the Oracle: the Land Use Impact of a Major In‐town Shopping Centre on Local Retailing

Planning policy aimed at preserving the viability of UK town centres halted the wave of out‐of‐town shopping centres – Schillers ‘third wave’ of decentralization. Subsequently, a number of major in‐town shopping centres were developed in the UK. The first of these was the Oracle Centre in Reading. This study examines the impact of the Oracle on retail activity in the town centre using land use data. The Oracle acted as a catalyst for change, accelerating trends already observed in the centre, shifting the prime pitch, weakening peripheral areas and increasing turnover rates and vacancy. However, many of the initial short‐term property market impacts on rent and vacancy appear to have dissipated over the longer‐term, leaving longer lasting land use changes in periphery areas. The added attraction of the town centre appears to have offset many of the trade diversion impacts. However, some adverse effects may have been masked by strong consumer spending and a vibrant local economy during the study period.

Housing supply and planning delay in the South of England

There is widespread concern about the need to deliver increased housing supply in the UK in order to address problems of affordability. One problem in achieving this is the nature of the planning system. UK housebuilding proposals need to be approved by Local Planning Authorities. The system in the UK differs from that in other areas of Europe in the extent to which decisions on planning permission are largely discretionary. Concern exists over delays in the evaluation of proposals and the negotiation of required changes. In practice, several factors may account for the time a new housing proposal takes to secure planning permission. Some delay may be due to planning whilst other factors relate to the ways in which proposals are formulated and/or specific site characteristics. Currently, there is little firm detailed empirical evidence on the causes of delay. The paper presents the findings from an ESRC funded research project that collected data on the time taken to gain planning permission for selected recent major housing projects from a sample of local authorities in southern England. Key characteristics of those developments such as number of units, location, etc were included. The whole chain of events in securing planning permission was also covered, including re-submissions and appeals. Hedonic analysis of the data highlights the factors determining the time development proposals take in the planning process. These results have been triangulated with interviews with key actors in the planning and development process in order to explore possible ways forward. The paper concludes with a range of recommendations.

Exit Strategies for Business Tenants

Adaptability is critical to success in business. Yet, many businesses in the UK occupy premises on fixed term leases, which run for several years, a feature that has great appeal to investors. However, during this time property requirements can change. This research critically examines the three main mechanisms by which tenants can bring their leases to an end, breaks, assignment and subletting. We examine the legal rules governing these devices and undertake analyses of lease data and interview and questionnaire surveys. The research finds that break clauses are an increasingly common exit mechanism agreed in the leases of office and industrial property tenants but are less frequent in retail markets. However they are not usually operated, raising questions about their purpose and timing. Breaks cannot give the more general flexibility of assignment and subletting, although these latter clauses are not often part of lease negotiations. Landlords have legitimate reasons for preventing some assignment and subletting but can be unnecessarily restrictive on some aspects. Addressing the disparate concerns of both sides of the landlord and tenant relationship on lease flexibility is a challenge to the property industry and to policy makers.

Flexible Property Leasing and the Small Business Tenant

Small businesses and commercial property leasing are two important policy areas for the UK Government. Hence, it has been promoting flexibility and choice in commercial leases as part of a wider enterprise and productivity agenda, and attempting to improve the awareness of small business tenants on property leasing issues. This article addresses issues of flexible leasing specific to small business tenants. Through an analysis of lease data from Investment Property Databank and a questionnaire survey of tenants in England and Wales, it examines the negotiation process, outcomes, and trends stemming from that process. There are major differences between small business leases and those for medium and larger sized companies. Small businesses have shorter leases, fewer rent reviews and earlier breaks. There are also differences in the negotiation process, most noticeably as between the very small micro business and other small businesses. A significant number of very small tenants take no commercial advice when negotiating leases even though many of them have no prior experience of taking leases; the smaller the business the less likely they are to take advice. While flexibility and choice in leasing has improved in recent years, the awareness of small business tenants on leasing issues is less good. Part of the problem may lie in the difficulties of dissemination to a diverse group. However, if voluntary mechanisms cannot demonstrably improve information flows to micro businesses, the small business issue may yet be the catalyst for legislation on all business leases, legislation the UK property industry has fought desperately to avoid for the last 13 years.

Death of the high street: identification, prevention, reinvention

Location is of paramount importance within the retail sector, yet defining locational obsolescence remains overlooked, despite significant concerns over the viability of parts of the complex sector. This paper reviews the existing literature and, through this, explores retail locational obsolescence, including the multi-spatial nature of the driving forces that range from the global economy, local markets and submarkets, to individual property-specific factors; and, crucially, the need to disentangle locational obsolescence from other important concepts such as depreciation and functional obsolescence that are often mistakenly used. Through this, a conceptual model, definition and diagnostic criteria are presented to guide future studies, policy development and the allocation of resources. Importantly, three stages are presented to enable the operationalization of the model, essential to future academic and industry studies as well as the ongoing development of policy in this economically important, complex and contentious area.

The basis of valuations for secured commercial property lending in the UK

Purpose – In the context of the financial crash and the commercial property market downturn, the purpose of this paper is to examine the basis of valuation used in the UK commercial property lending process. Post‐crisis there is discussion of countercyclical measures, including the monitoring of asset prices; however there is no consideration of a different approach to property valuation. This paper questions this omission, given the role that valuations play in the bank regulatory process.Design/methodology/approach – The different bases of valuation available to lenders within international valuation standards are identified as market value (MV), mortgage lending value (MLV) and investment value (IV), with MV being the most used in the UK. Using the different bases in the period before the financial crisis, the UK property market is modelled at a national office, retail and industrial/warehouse sector level to determine the performance of each alternative valuation basis within the context of countercyc...

Principal‐agent Issues in Asset Acquisition: UK Institutions and their Investment Agents

Summary This paper explores principal‐agent issues in the stock selection processes of institutional property investors. Drawing upon an interview survey of fund managers and acquisition professionals, it focuses on the relationships between principals and external agents as they engage in property transactions. The research investigated the extent to which the presence of outcome‐based remuneration structures could lead to biased advice, overbidding and/or poor asset selection. It is concluded that institutional property buyers are aware of incentives for opportunistic behaviour by external agents, often have sufficient expertise to robustly evaluate agents’ advice and that these incentives are counter‐balanced by a number of important controls on potential opportunistic behaviour. There are strong counter‐incentives in the need for the agents to establish personal relationships and trust between themselves and institutional buyers, to generate repeat and related business and to preserve or generate a good reputation in the market.

The challenge of self‐regulation in commercial property leasing: a study of lease codes in the UK

Purpose – UK Government policy to address perceived market failure in commercial property leasing has largely been pursued through industry self‐regulation. Yet, it is proving difficult to assess whether self‐regulation on leasing has been a “success”, or even to determine how to evaluate this. The purpose of this paper is to provide a framework for this and a clearer understanding of self‐regulation in commercial leasing.Design/methodology/approach – A literature review suggests key criteria to explain the (in)effectiveness of self‐regulation. UK lease codes are analysed in the light of this literature, drawing on previous research carried out by the authors on the operation of these codes.Findings – Lease codes appear to be failing as an effective system of self‐regulation. While there are influential market actors championing them, the fragmentation of the leasing process lessens this influence. The structures are not there to ensure implementation, monitor compliance and record views of affected stake...