Independent traders based in railway arch units on a Herne Hill industrial estate say they could fold as new landlord Arch Company (Arch Co) demands higher rents.
In 2019, Arch Co bought 5,200 properties from Network Rail, many of them old railway arches housing commercial tenants. The deal was worth £1.5 billion according to the Financial Times.
Having become the leaseholder for the Bath Factory Estate, Norwood Road in February 2022, Arch Co tenants say are now hitting some of them with rent increases of over 30 per cent.
Jean Bergin, Managing Director of Local Greens, a not-for-profit veg box company, whose lease expired last year, says she has been told to cough up £2,500 more annually.
After over six years at the Bath Factory Estate, she fears her time is up, saying: “It’s just immoral and economically unsustainable to get one company to have ownership of so many small premises across the country because they’re setting the market rate themselves.
“People are tightening their belts and pay escalation is increasing and we can’t afford an increase to this extent.”
Speaking to the News, Arch Co said rents were based on “the fair market rate, as specified in each customer’s lease”.
They added that that their £11 million hardship fund had provided three months’ free rent for nearly 1,600 small business customers.
Karl Lewin, owner and founder of furniture makers Karl Lewin Fine Woodwork, said he has been told that a renewed lease will cost £2,500 more annually, an increase of over 30 per cent.
Having traded from a Bath Factory Estate arch since 2011, he said: “I feel that’s too much of an increase. I simply do not have the money to up the rent. I was expecting it to go up but was thinking at a maximum of 10 per cent.
“To be honest, it’s a great worry. The last thing I need now is taking on a lease at what I consider an exorbitant rate and just hoping everything is going to be okay.”
Some tenants say they have been asked to sign a ‘tenancy at will’. One tenant said their solicitor had warned them that signing the document could allow Arch Co to terminate their tenancy without notice.
An Arch Co spokesman said the ‘tenancies at will’ were “bridging documents” that “don’t affect the rights any tenant has under their lease”.
They say that some tenants were paying rent to the previous landlord even after their tenancies had expired so this was a way of formalising informal arrangements.
Dermot Jones, Director of South London Makerspace, based on the Bath Factory Estate, said Arch Co’s communication had been poor.
He explained that he’d only found out about the takeover in January, when a subcontractor said they were visiting on behalf of Arch Co.
When he explained they he wasn’t an Arch Co tenant, the subcontractor allegedly said “you will be soon”.
Arch Co say letters, written in collaboration with the previous landlord, were posted to tenants informing them of a change in landlord.
Dermot said this “hard to decipher letter… gave us little insight into what to expect” and some went unread because they were posted to units used as storage rather than trading.
The Financial Times and the Times have both previously reported on cases where rents shot up under Arch Co, imperilling tenants’ businesses.
Arch Co are backed by US private equity firm, Blackstone, and Telereal Trillium, a UK-based property developer.
In an official statement, an Arch Company spokesperson said: “We want the Bath Factory Estate to continue as a thriving home for small businesses.
“We have tried to make the transition from the previous intermediary landlord to The Arch Company as smooth as possible, including honouring all existing lease agreements, and will continue to do so.”