What is the cost of an empty retail unit over a 5 year period?

Many vacant retail shops have been untenanted for five years or more in Ireland.

This means that the landlord has managed to do without a rental income for five years.  As such, they might be wondering what do they do for money?  Well, there’s an old Yorkshire saying that “owt is better than nowt” which, in today’s terms translates as “some money is better than no money”.  In accountancy terms, it means cashflow.

In plain English, it means “what the hell are you doing, chaps?”

There seems to be a complete lack of common sense when it comes to valuing and marketing ‘unlettable’ property in this country, and ANY property that has not been let in three years is, in my humble opinion, UNLETTABLE.

As such, it is at best dishonest, and at worst criminally negligent to value something ‘above its real worth’ just to pretend to a receiver, or a bank that an asset is worth keeping.  Let’s be honest with ourselves – and I do think that is important not to believe the yarns one spins to others – and say, if these properties are not let over a five year period, we run the risk of having to spend a lot of money in order to bring them “up to scratch” when we go to let them AFTER five years of persistent damp, no heating, no maintenance, neglect and whatever else might have happened over that period.

So, doing nothing with a building might actually cost the owner a lot of money over a five year period than letting it for free.

In addition to this, there is also a loss to the Revenue Commissioners insofar as the building should have ‘housed’ a business that would normally have been generating VAT-returns, PRSI-returns and income tax returns.  Even a single, self-employed person would have generated some tax returns over this period, so our government is losing out and so too is the local communitiy as both central and local government has to make cuts due to a shortfall of fiscal activity by the ‘would be’ tenant.

Perhaps more importantly, if the retail unit was to be used by a local manufacturer or craft producer, it has ‘retail tourism’ losses to account for as well – so while our retail property stock lies fallow, our national and local economies also stagnate.  Every empty retail unit in Ireland equates to one ‘wannabe’ Irish entrepreneur not getting a chance to develop and hone their skills.

On top of all of the above losses, the local economy also suffers.  Taking a very simple example, a single, self-employed shopkeeper would have to get to work, have lunch, possibly two tea or coffee breaks and run the shop.  Not allowing for rent or inventory purchases, the bare minimum of local expenditure is represented in the table below.

Image

From this example, we can see that the local economy loses over €100,000 per empty retail over a five year period.

It is now time for local government all over Ireland to ‘encourage’ failing local property owners (and receivers) to be a little bit more creative in letting their properties, or pay punitive commercial rates.  I am suggesting that a sliding scale like this should apply.

  • Full commercial rates (payable by property owner) during periods without a tenant
  • Commercial rates + 100% surcharge if the property is vacant for 12 months or more
  • Commercial rates + 200% surcharge if the property is vacant for 24 months or more
  • Commercial rates + 300% surcharge if the property is vacant for 36 months or more

In a lot of cases, it is a ‘lazy or incompetent’ receiver or ‘beligerent’ bank that holds the deeds but has no interest in anything less than their inflated, out of touch valuation.  These people are preventing progress by a combination of procrastination and ineptitide.  They will ONLY change their ways if a financial driver is put in place that will encourage them to utilise their assets instead of sitting on them and allowing them to rot.

I am not proposing they give away their properties rent free, although by allowing them to lie unused for 5 years or more is, they have been holding to them themselves rent free – so why not consider giving them away to someone for free, for say a two year period.

If the landlord cannot afford to pay the commercial rates, then the property should be handed over to someone who CAN and WILL let the space to a new, local entrepreneur looking for a startup location.

The next question is “who to give them to?”

Obviously, there is no point in giving them away to someone incompetent.  I have seen many spaces rented to crafts people on very generous terms and, instead of opening to the public on a daily basis, many just used the spaces for storage.  Obviously, there would need to be compulsory opening hours/days – otherwise the space just passes from one beligerent to another.

Dublin City University, local enterprise boards and many others, run (or fund) courses for entrepreneurs, inventors, crafts people and artisans.  Perhaps, local government would consider funding some units from the new commercial rates income proposed above.

Surely this better than doing nothing about lazy landlords and, as a consequence, having to inrease commercial rates for those local businesses that are still trading and, consequently, forcing some of these out of business too.  Personally, I’d rather see a few landlords suffer a little bit than watch more hard-working local entrepreneurs be forced out by increased commercial rates demands to compensate for the ‘rates free’ empty retail units held by lazy landlords, receivers and/or banks.

There is another issue that looms large – usage!

We already have enough fast food outlets, language schools, call centres, barber shops, mobile phone and computer repair shops.  This initiative should be overseen by Fáilte Ireland, Enterprise Ireland and an independent grant-issuing body like The Ryan Academy.  The focus should be on growing Irish-based, indigenous industry that will attract foreign tourists and/or focus on exportable goods/services, e.g.

Retail shop units (inward tourism)

  • Arts & Crafts
  • Antiques & Collectibles
  • Culture & Heritage
  • Fashion Design / Outlet (Clothing & Accessories)

Office space (exportable services)

  • Computer applications software
  • Gaming software (PC/Tablet/Phone)
  • Phone apps

The above is just a short list for illustrative purposes and could be expanded by the appropriate overseeing organisation for Irish entrepreneurs and other emerging commercial talent.

This is a discussion document, so I welcome feedback and expansion on the above ideas – so please don’t be shy.

 

 

 

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