All That Glitters Is Not (Commercial Property) Gold

Written by Andrew McDonald, co-founder of Credo Living and Tandem Real Estate

I’ve spent much time on the new Clubhouse App over the last month. In and amongst all the self-promotion, there is actually some valuable content and the occasional gleaming nugget to pick up. As I straddle now between running our commercial agency, Tandem Real Estate, and pushing the message out on our new property repurposing platform, Credo Living, I’ve been co-hosting a weekly Clubhouse room on commercial property and the opportunities that lay within it.

From these, it’s clear there’s going to be a rush to the high street over the coming year(s): a sentiment espoused by the other participants in the various virtual ‘rooms’ I’ve been in. This doesn’t mean a rush back to spend our hard-earned (shiny) pennies, more like a rush to grab the commercial conversion opportunities that lie ahead as our high streets re-open with inevitable vacancies post-COVID. That, combined with a softening of the planning system, seemingly to permit an easier path for retail to residential conversion, do we now face the new ‘office to resi’ which sent the market into a tailspin a number of years back. 

An oncoming ‘Gold Rush’ is a phrase which was bandied around recently while hosting a Clubhouse room. Of course, a Gold Rush can lead to the potential pitfalls that getting caught in the sirens’ wail of a new strategy may entail. I Googled the phrase Gold Rush while writing this article: ‘the headlong pursuit of sudden wealth in a new or lucrative field’.

Mining further through Google and sifting through the debris, I was also reminded that many died along the rocky paths leading to the gold streams and rivers – others perished through typhoid and squalid conditions while lawlessness and bandits also claimed the lives of many. Ok, so while the comparison may be stretched, I do wonder whether a new ‘Gold Fever’ will lay waste to many starry-eyed property speculators hurrying along the path to property riches ahead.

I can already feel the fervour in the market as the training academies ‘big up’ the seemingly lucrative ‘retail to resi’ potential, whipping property speculators into a frenzy. Of course, mix this with FOMO (Fear Of Missing Out, for us oldies!) and there’s a potent mixture which I’m sure will lead to a variety of miscalculations as developers, new and old, rush in to beat the competition. 

“remember that property is a ‘long game’. We really only get judged at the end of our time in it, and a steady and gradual accumulation of assets should see us there with some riches and our sanity intact.”

There’s a tightrope to tread at this stage, of course, as getting one’s ducks perfectly in a row and ‘analysis paralysis’ may mean missing out on some of the low hanging fruit. Alternatively, go gung-ho and without the necessary research, understanding of the new planning laws and delicate state of the retail market, and face the prospect of being painfully uneducated, underprepared and unaware of the pitfalls ahead.

So, what to do? Well, first of all, remember that property is a ‘long game’. We really only get judged at the end of our time in it, and a steady and gradual accumulation of assets should see us there with some riches and our sanity intact. That would be my opening salvo. Not to say don’t jump at the chance but, have in mind, we’re told the current economic climate is the poorest for 300 years, and with furlough and other Government initiatives to prop up the economy due to tail off as 2021 unfolds.

Now, I’m well aware that ‘no one likes a bear’, and I’m not being one, but it is my firm belief there will be some very attractive deals to come towards the back end of this year so biding one’s time might be prudent. Institutional investors with huge exposure to retail property pretty much view the sector as one might do a trip to the dentist on the 25th December. They will be selling, and institutionally owned property, especially at a smaller scale, often comes with juicy fat on it as they rarely sweat their smaller assets to the same extent as the SME developer.

Regrettably, there are likely to be foreclosures on existing landlords who have suffered at the hands of Rishi’s ‘tenant-friendly’ COVID measures. Keep an eye on what the receivers are up-to and scour the auctions, too. Get up-to speed and fully conversant with the new PD rights which are filtering through this year. Work out which retailers are still taking space (you may still need one at ground floor level) and which micro-locations in your various target areas find favour. Strengthen your relationship with the commercial agents and pound the streets looking for appropriate opportunities to canvass. 

We at Credo Living are super excited about the opportunities that lie ahead. Planning is softening, internet sales will continue to rise, ‘retail’ and our town centres will go through a seismic repositioning and a golden opportunity lies ahead for the ambitious developer. While the situation with PD unfolds over the next few months, we’ll continue to strengthen our relationships with investors and start mining for interesting opportunities. Happy prospecting!