The complex problem of empty high street shops

However, landlords of retail properties tend to resist what they believe is an unnecessary violation of their rights.

They argue that they are the biggest losers when their premises are vacant because they have to pay interest, property taxes and often a mortgage, but receive no rent.

They say the main reason for the vacancy is not a landlord conspiracy, but the difficulty of finding suitable tenants. This is especially true now on high streets selling non-essential products such as clothing and electronics, which are most exposed to online competition.

During the pandemic, people changed their shopping habits and turned to online shopping.

In the US — where the same debate is raging — a study by Erica Moszkowski of Harvard University’s Joint Center for Housing Studies says landlords are reluctant to sign retail leases in the currently weak market because retail leases tend to be quite long-term and landlords want low rents avoid.


She says vacancy taxes encourage them to be less picky in some cases, but there’s a downside.

A poorly designed vacancy tax could penalize landlords who want to find tenants but can’t find them.

Also, sometimes it can be in the interest of the surrounding businesses if landlords wait for good tenants, which will bring more customers to the area.

The immediate crisis triggered by the pandemic may well ease off. The Reserve Bank of Australia’s Financial Stability Review of October said retail vacancy rates have now mostly returned to their low pre-pandemic levels, though not in CBDs suffering from the long-term trend towards working from home.

The share of online sales has also returned to pre-pandemic levels of around 10 per cent, but if Australia follows the trend in other countries it will rise again.

At a time when consumers are shifting to online shopping and the economy is changing, maintaining busy high streets is a complex challenge, but a well-designed vacancy tax is worth keeping as one of the solutions on the table.

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Brian Lowry

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