Supermarket chains and retailers who are moving into the property market and becoming landlords could destroy their reputations if they are not careful, say leading tax and advisory firm Blick Rothenberg.

Heather Powell a partner at the firm and head of property said: “ Many retail groups who have invested in property have surplus property, and are considering what they can do with these properties. Disposal to a developer is a simple option, but building homes on surplus sites, which will generate a reliable, future income stream, is very attractive, and could guarantee the future of the business. Many Retailers are looking at recent headlines and asking, ‘Is it time to become a landlord?’ ”

She added: “ An increase in quality homes available for long term rental is welcome. However new landlords need to be aware of the challenges of renting homes. The legislation governing the rental of UK properties has become increasingly complex. New entrants to the market need to consider whether they employ an in-house team or outsource the management of their properties, and factor in the costs of this work when considering whether to become a landlord. It is not simple, and it can go wrong.”

Heather said: “ If investment in a competent property management team is not made reputations could be shattered. Unhappy tenants can destroy the reputation of a landlord, which could have an impact on the letting and retail business, and potentially destroy the whole businesses. Any step into the world of landlords needs careful consideration, and investment in bricks and mortar and a management team with the knowledge, and skills to make the letting business a success.”

She added: “ There is still a place for traditional bricks and mortar retailers but the last year has shown that long term success in the sector requires diversification – into online selling, but also other areas.”

Heather said: “ Examples of this strategy are already in the public domain. John Lewis are planning to build 10,000 rental homes in partnership with established developers on sites vacated by their stores, car parks or above Waitrose supermarkets. Lloyds Bank are reported to be about to complete on the purchase of a block of 50 flats in Peterborough that they will rent out, and it is expected that their portfolio could eventually include homes on sites vacated by branches that have now closed.”

She added: “ The fight to acquire Morrisons would appear to be fuelled by ownership of the group’s large property portfolio. One of their potential buyers, Fortress, have pledged that they will not sell of the stores. This pledge does not stop redevelopment of non-performing sites – and diversification into homes for rental would appear to be one of the best options.”