Selective Sunday trading reform fails to maximise benefits.........

and potentially puts new investment in retail at risk.

The government's 'Consultation on devolving Sunday trading rules' has been published this morning.

The paper quotes from a study that suggests that there could be a benefit of £1.4 billion a year from removing the existing restrictions across England and Wales. The consultation does not however suggest a blanket removal, but instead suggests that the power should be devolved to local areas. The actual financial benefit of the proposal is therefore largely unknown.

The first option suggested by the paper is that powers should be devolved 'to local leaders, for example metro mayors, through devolution deals.' 

It is unclear exactly who these leaders are, but current proposals for metro mayors appear to cover only large conurbations. Devolving powers in this way would appear on the face of it to leave the majority of England and Wales without a choice over Sunday opening hours and to be focussing the benefits towards towns and cities and away from rural areas.

The second option suggested is that powers should be devolved to local authorities.

In either option the devolved powers will be capable of being applied to specific zones and 'potentially exclude out of town supermarkets'.

It seems to us that there is a fundamental flaw in the thinking behind either of these options in that no consideration has been given to the effect of local boundaries and the effect that different approaches from different local authorities or leaders might have on transport, travel and road congestion.

For instance, if the Wiltshire local authority were to decide, broadly, not to relax Sunday opening hours but surrounding cities such as Swindon, Bristol, Southampton did then it is likely that significantly more journeys would be made over greater distances on Sundays than is currently the case.

We are not sure that would be beneficial.

As well as the transport issues there are site by site cost and value issues to contend with. If, as the consultation suggests, the benefit

 'is generated from lower prices as a result of increased efficiency from shops being able to make more use of existing stores' 

then it follows that stores that are able to open for longer on a Sunday will be more valuable to retailers. They will therefore theoretically be willing to pay a higher rent leading to a higher capital value. 

However if the restrictions can be added or removed at a local level can a retailer or landlord ever be certain about that enhanced value?

Although we accept that, to quote the consultation paper 'Extending Sunday trading hours would ..... support competition and drive economic growth' we take issue with the words 'across the country' that follow. In fact the proposed restrictions would benefit certain areas of the country and not others and rather than supporting competition would be more likely to skew it.

As it happens, we do not have a strong view as to whether the restrictions should be relaxed, but it does seem to us that, if there is an economic benefit to be gained which the government wishes to realise, then it would make sense to capture that for the whole of England and Wales and not just selected parts.

Sunday Trading Reform - A mess waiting to happen

George Osborne is set to announce a consultation on changes to Sunday trading laws.

Apparently he intends to leave it local authorities to decide policy. That means, for example, that Dartford Council could allow Bluewater Shopping Centre to open for longer hours on Sunday whilst across the Thames, Thurrock Council could refuse to allow extended opening at Lakeside.

I can only imagine the employment difficulties that retailers would face with such a piecemeal policy.

What is easier to understand is that the ability to trade longer on Sunday in certain locations could improve the attractiveness of those locations to retailers which in turn could lead to higher rents and higher capital values.

"Cities may set Stamp Duty and keep revenue"

reports a Times newspaper headline today, quoting Danny Alexander the chief secretary to the Treasury.

There are some compelling arguments marshalled in favour of such a change but what would it mean for real estate investment in those cities?

On the face of it, a city with a lower SDLT rate ought to be more attractive to real estate investors and it would certainly lower the purchase costs; but would there be an increase in the volatility of stamp duty rates?

Uncertainty has always been a problem for investors in long-term relatively illiquid assets. Property valuations are affected by changes in stamp duty even when properties are not sold, a stamp duty increase can reduce values overnight so increased volatility could be a problem.

And, what of the boundaries? We do not yet know where any lines might be drawn but is it possible that the metropolitan areas of Liverpool and Manchester might benefit when Blackburn and Preston don't?

What is sure is that any differential in rates would affect investment decisions and almost inevitably create winners and losers.

Implementation of any such changes remain a long way off, but consideration must be given to not skewing the field against towns and cities that need and deserve investment.

Not so much 'Factoid' as 'Fractoid'' #fractoid

The Sunday Times today reported an oft repeated 'fact' that the closure of 43 unprofitable Tesco stores would result in the loss of 2,000 jobs.

There is a temptation to describe this as a factoid. Oxford Dictionaries defines a factoid as

"An item of unreliable information that is reported and repeated so often that it becomes accepted as fact"

I am not sure however that the Sunday Times report strictly meets that definition because it is highly probable that the closure of those 43 stores will actually result in that many job losses.

What is not in any way described however is that the store closures are caused by increased competition from other retailers, in particular Aldi and Lidl who have themselves announced the intention to significantly increase staff numbers over the next few years. In fact with the UK grocery market set to continue to grow over the next few years the sector is likely to see net job creation rather than job losses.

It seems to me therefore that the job loss numbers are what I might term a fractoid, defined as

"An item of information that is reported and repeated so often that it becomes accepted as relevant, even though it isn't."

In other words the statement includes only a fraction of the information required to be truly helpful.

I would be interested to hear from you with other fractoids.

A Parliament for the whole UK?

Imagine the agents brochure, for sale a couple of well located terraced houses with gated access, close to Horseguards parade, and a large residential conversion opportunity with clock tower and excellent river views?

Notwithstanding a noble history the current Houses of Parliament building is in a poor state of repair and, even fully refurbished would be barely fit for purpose. That refurbishment is likely to cost the taxpayers in the UK up to £ 5 billion.

There is no particular reason why parliament needs to sit in London, which is now one of the most expensive cities in the world. Surely it would be much better to move it,  and the other major institutions and departments of government to one or more of the regional centres; Manchester, Birmingham and / or Liverpool for instance.

The savings from not refurbishing the current building, and releasing it and other Westminster buildings to the private sector would more than cover the costs of the new buildings required (even allowing for the propensity of civil servants to overspend on such projects).

The removal of the government from London would free up infrastructure capacity and allow private sector investment into some of London's most iconic buildings. More international air traffic would be diverted to Manchester relieving congestion at Heathrow.

As the BBC has already proved a move to Manchester is perfectly possible and think of the signal that such a move would send to domestic and inward investors to the northern half of the UK. A move timed to coincide with the completion of HS2 would allow for the significant additional capacity that would be required for such a move.

In my view this is exactly the type of bold strategic thinking that is required to ensure that the UK and London remain one of the best places in the world to live, work and invest.

I fear however that I might wait a long time to see that agent's brochure.

UK Infrastructure

I'm in Glasgow this morning, having flown up from Heathrow. I find that flights are always a good opportunity to reflect on some of the wider issues that are driving the general economy and real estate markets.

As I am presenting my IPF short paper on real estate debt at lunchtime, this morning my thoughts drifted to the fact that occupier demand remains a key driver of real estate values.

One of the important factors in that occupier demand is infrastructure, and more specifically transport. The evidence of demand for (and the increasing value of) commercial and residential property close to Crossrail stations is a clear manifestation of that.

The comparison between King's Cross and Gare de Nord Stations provides another example of the benefit of investment in first class facilities. The same applies at Heathrow T5 and the new T2.

The Centre for Cities published research earlier this week which highlighted the continuing North / South divide in terms of new investment and jobs.

That divide is a problem for everyone in the UK because capacity in London and the South East is limited and therefore without a stronger North, new jobs and investment will inevitably drift towards the continent and away from the UK.

In my mind that means that HS2 is certain to provide a catalyst for investment (if it goes ahead) and the important question is not if it is necessary (it is) but how it can be delivered at a sensible economic and social cost.

That is a question which will never be able to be answered definitively (at least in advance) but I do have a few thoughts on that so, watch this space for my follow up piece - "Does London need the Houses of Parliament?"

Zombie Loans: Fact or Fiction

The IPF published an article in its Focus journal last week based on the short paper that I produced about UK real estate lending.

Here is a pdf of the article.

Innovation through Experience

We are today launching our new website and I thought that it would be a good opportunity to explain why I chose the name Recept, and what Innovation through Experience means to me and my colleagues.

Some months after I formed Recept in  July 2010, I was asked in a meeting where the name had come from. Before I could reply one of the colleagues of the questioner said "It's obvious, it's an anagram" and before I had time to form the question "of what?", he went on to say "of Peter C".

Actually, when trying to decide on a name I was looking through an old dictionary that I inherited from my grandfather, at words that began with RE (for Real Estate). Recept (a word that has fallen out of common use) was defined in that dictionary as "a new idea formed in the mind by the repetition of similar percepts, as successive percepts of the same object."

That definition, phrased slightly differently is Innovation through Experience.

To me therefore what Recept means is that in a rapidly changing world, new ideas and new ways of doing business are vital to success. The trick however is is knowing how to evaluate and choose which of those new ideas will work, and efficiently discarding those that won't; and that is where experience is so important.

Throughout our careers the Recept team and I have been at the forefront of innovation, in financial structuring; in the use of joint ventures; in asset and property management; in corporate responsibility and customer service; in systems and process management; in the sustainable design and operation of buildings and in developing the value in new asset classes.

So Innovation through Experience is at the heart of what we do and although it may be have been unintentional, I am proud to have my name so closely associated with the Recept brand.