The NAEA Propertymark Commercial Advisory Panel has suggested the Government should consider potential ‘unintended consequences’ of high street rental auction powers given to local councils.
The Ministry of Housing, Communities, and Local Government (MHCLG) confirmed that vacant shops and empty premises will be transformed using these powers to revitalise high streets in England, as part of the Government’s growth mission.
High street rental auctions allow councils to auction leases for commercial properties vacant for long periods.
Eight more councils, including Barnsley, Broxtowe, Camden, Hillingdon, Lichfield, North Northamptonshire, North Somerset, and Westminster, have joined the programme, bringing the total to 11, with Bassetlaw, Darlington, and Mansfield as early adopters.
Propertymark supported the scheme but recommended that local authorities should have the flexibility to design and implement auctions based on their area in its July 2023 consultation response.
The industry body also urged councils to set reserve prices to safeguard market values and cover mortgage costs.Â
Michael Sears, a member of the NAEA Propertymark Commercial Advisory Panel, 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.”
Sears 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.”
