Lloyds Bank recently announced a cut of 3,000 jobs from their workforce of 75,000 which will result in the closure of 200 High Street branches across the UK. Although relatively small in terms of the total estate, it is highly likely that other banks will follow suit.
Lloyds tried to justify these closures as a consequence of Brexit. Nonsense. These closures are all to do with the increase in digital banking, and all investors should be aware of the impact on the High Street and retail investments generally.
If we were running a bank we would get together with our competitors to have a single banking outlet in each town over a certain size serving and funded equally by all banks.
The impact of this would be to drastically cut the number of bank outlets on the High Street. If you have retail investments occupied by a bank you should be looking very closely at a disposal. Some banks will convert readily into alternative retail outlets, but many will not – especially those traditional, listed banking halls.
More importantly, we would advise extreme caution in considering the purchase of any bank investment. There is more to it than having a good covenant (and with some banks even that is questionable). Consider the location, the potential for the bank to close, demand for the space from alternative retailers and future rental growth.
Retail is changing fast and great care is needed in managing existing stock and acquiring new stock while the market transitions from the High Street to the Internet. All retail investments held should be reviewed and potential acquisitions should only be undertaken after careful consideration of the potential for rental growth.
The retail offering in major cities has polarised into prime indoor shopping malls with everything else being secondary. We strongly recommend focusing on affluent market towns with a physically constrained town centre providing a natural limit on the supply of stock. There should also be a track record of consistent growth.
And remember – when you have purchased your retail investment, make sure the rent is paid directly into your account to save you searching for a non-existent High Street branch.