Sale of railway arches worries thousands of small businesses

Thousands of businesses across London, as well as in other major cities like Leeds, Newcastle, Manchester, and Birmingham, operate out of railway arches. These businesses are generally small and independent, such as craft beer breweries or coffee roasters. When Network Rail announced they intended to sell 5,500 arches in early August, thousands of businesses spoke out, voicing fears about increased rent and changes in terms that could lead to them closing shop doors. In response came the Guardians of the Arches, an organisation that formally launched in May of this year with the help of New Economics Foundation and the East End Trade Guild and already spans 600 members. They called for the sale to be put on hold until tenants’ interests could be ascertained. However, in mid-September property investors Blackstone and Telereal Trillium won the bid for 4,000 railway arches in exchange for a payment of £1.5 billion.

Adam Dakin, managing director of Telereal Trillium has talked about the possibility of opening 430 empty arches up for business. He confirms that the company will be focused on ensuring the rights of the existing arch tenants, claiming they “want to keep the quirky and independent nature of the tenant mix.” Already Telereal and Blackstone have agreed to sign a charter that will put the tenants first, with promises of “new structures to provide financial or other support” for tenants that are struggling to pay their bills, and an assurance that they will listen to reviews about rent and respond in a timely manner. But many are quick to note that nowhere in this charter is there a promise to keep rent prices low. According to Will Brett, Director of Communications for the New Economics Foundation: “The potential new owners have made a lot of nice noises about how they are going to be on the side of tenants and ‘tenants first’. But what the Guardians of the Arches want to see is nice noises being turned into concrete commitments.”

The uncertainty of the new situation is what makes businesses nervous. “[Businesses] have no way of knowing what the intentions of the new owners really are.” Brett says, “They are open to negotiations; they want to be treated as the formal tenants association of the estate, they want to get it down on paper and making a formal commitment to the tenants.” Several have expressed concerns that the companies’ desire to turn a profit will lead to overnight rent hikes that put them out of business. According to Brett: “ A starting point would be to meet our demands for a full, transparent rent and lease audit, and to recognise Guardians of the Arches formally as a tenants’ association.”

The reason behind this call for transparency is “because, historically, they’ve had real problems with differences on rent. Arches next door to each other being told that they been compared to different businesses in different locations. There’s been a divide in rural approach by Network Rail that has been leaving tenants feeling confused and disorganised. They want to understand how rent is set and what parameters are used; they want that to be transparent so there’s no scope for suspicion and uncertainty. When it comes to leases, tenants have been forced to sign away their security of tenure; they are contracted out of the Landlords and Tenants Act but that’s the only way they’re able to sign on as tenants.”

One of the reasons behind the lack of trust is tensions that took root with Network Rail as owners. Leading up to the sale, businesses in the arches have been hit with rent increases of 250-300 per cent. According to Kristen Schnepp, founder of cheese company Gringa Dairy: “Our primary issue with Network Rail is they absolutely gouge us on service charges. They don’t provide the services we pay for and have not reconciled the service charge accounts since 2013. We can’t seem to get any help or have any recourse.” According to Brett, “the fact that Network Rail does nothing has definitely come up…Boosting rent so it goes up to the level of conventional commercial estate is madness when these places are really badly looked after. You have trains rumbling overhead, they’re damp, and lots of tenants end up investing their own money in these arches. Charging a service charge at all seems a bit much given that there isn’t much service going on.”

Ian Banfield, project manager at LASSCO explains that Ropewalk, in the east end of London, has long been a hub of small-scale businesses. “The area around Ropewalk was home to several small food producers mid to late 2000s: Monmouth Coffee, St John Bakery, The Ham & Cheese co, Neals Yard & Tayshaw Greengrocers to name a few. They would open their arches at the weekend to serve locals,” he explains. “LASSCO has been resident on the Bermondsey site since the mid ‘90s. Adrian Amos, proprietor of LASSCO saw an opportunity to open the Ropewalk creating a space for the more keen operators, to congregate (footfall was low at the beginning!). This broadened the range of both produce and hot food for locals and tourists. Maltby Street Market developed organically from that point.

“The arches are important for small operators for various reasons; low cost, appropriate size and to some historic relevance. For years a great deal of these properties had no value as they snaked through the more unwanted areas of our cities. Many were open to the elements with earth floors. The willingness of small entrepreneurs to get involved and in turn them into functioning spaces was largely down to affordability of these neglected spaces. Some were barely acknowledged by NR (Railtrack and before it British Railways) and there remain to this day instances of operators with no leases for spaces they have been operating out of for twenty years or more! The shiny, roller shutter-fronted lines of plastic-lined arches we are familiar with are quite a recent development.

“The value of them has largely been created by the many businesses that have worked in these spaces. Years ago the arches were derelict, dead stock, now they’re relevant and worth a visit.”

While uncertainty lies ahead for those in sold arches, and unideal circumstances for those that have not been sold, the publicity behind the sale has brought the arches into the public eye. With politicians like Hackney South and Shoreditch MP, Meg Hiller, Jeremy Corbyn, Baroness Bakewell, and transport secretary Andy McDonald showing support for Guardians of the Arches, the small businesses at risk won’t go down without a fight.