WHAT DOES THE FUTURE HOLD FOR OUR HIGH STREETS?
Knight Frank's Head of Retail Research, Stephen Springham, talks us through what's happening to the UK's high streets, and whether they have the potential to become flourishing residential centres
Stephen Springham Head of Retail Research
Across the UK, the fate of our high streets has been the subject of much debate. Are they dying or are they dead? Can they recover from the Covid-19 pandemic and subsequent lockdown? If not, what happens next?
It's largely agreed that the traditional high street in the UK is in a bad shape. Vacant lots punctuate those with people in them as well-known brands close the doors in favour of digital-first shop fronts, or streamlined operations placed more strategically. The future, it seems, could be bleak for the traditional blend of branded and independent high streets.
This isn't to say the future of our shopping streets is terminal, nor do we face the ghostly prospect of boarded up properties left to rot. Instead, there is evidence to suggest that real estate could be reconfigured to become more residential. If this trend comes to bloom, the complexion of our retail centres could change completely, as could the very hearts of our cities and towns.
Stephen Springham, Knight Frank’s Head of Retail Research, discusses the potential our high streets hold and what the likelihood is they could become mixed-used precincts more akin to what we see across the UK’s most urbanised centres, or the European continent beyond.
What is the likelihood we’ll see traditional UK high streets turned into areas that are more lived in?
The challenges facing the UK high street have been well-documented, though not necessarily widely understood. The phrase ‘the death of the high street’ has become commonplace, leading to assumptions that all town centres as we know them have no future.
This is an over-simplistic generalisation. Some towns continue to thrive (Covid-19 notwithstanding), while others admittedly face major struggles in their current incarnations. It is all about defining what the role of that centre is going forward, frankly not all town centres need to be retail-led as has often been the case in the past.
In some, the role of retail could be de-emphasised and surplus retail floorspace repurposed to other, more appropriate uses, be they residential, senior living, student accommodation, offices or hotels. We are likely to see parts or portions of certain towns converted to non-retail uses, rather than the high street turned on its head on a wholesale basis.
What will have to happen to commercial real estate for this to happen?
Converting space from an over-supplied market (which retail most definitely is) to a multitude of other under-supplied ones appears, on paper, to be an absolute no-brainer. In reality, it is often anything but. There are a number of divides that have to be crossed before any repurposing becomes viable. Firstly, geographies have to align – town centres that are most challenged and have the highest retail vacancy rates are not necessarily those with high demand from other uses.
Secondly, planning obstacles must be overcome, although radical planning reform introduced this month (September 2020) should hopefully aid this process. Thirdly, the retail floorspace has to be configured appropriately. If it’s a free-standing block or part of shopping centre that easily detaches from the rest of the scheme, then fine.
But a lot of vacant retail floorspace takes the form of scattered, high street units, with disparate ownership – and it is very hard to engineer this into alternative use. Fourthly – and finally – values have to stack up to make repurposing financially viable. And despite its challenges and significant re-basing, the value of retail real estate is still much higher than other property classes in many locations. Most, or indeed all of these stars have to align for conversion to be feasible and financially viable.
Is there evidence to suggest this is already happening? If so where?
There is some evidence of this happening already, although the process is still more in its infancy. Altrincham in the north west is a good example of a town that has completely re-invented itself. The opening of the Trafford Centre undermined Altrincham’s credentials as a major retail destination and a reappraisal of the town’s role has seen it de-emphasise its retail offer in favour of other leisure and community-led uses. Rather than a retail-led ‘ghost town’, it is now a broader-based centre in which retail has a more supporting role.
In Guildford, the Debenhams department store recently sold for circa £20 million, with huge demand from a number of alternative use sources. A freestanding, riverside location in a very strong town, this was a relatively rare example of where all the stars aligned, as per my previous comments. Similarly, Knight Frank recently advised Aberdeen Standard on the sale of The Broadwalk Shopping Centre in Edgware, North London, to Ballymore. Rather than demolish the whole scheme, it will be repurposed under a mix of uses that reflect its location as major suburb and commuting hub.
Are people’s consumption habits facilitating this change?
Retail is, by its very nature, always driven by consumers. And consumption patterns are subject to constant change. Not all retail centres have necessarily evolved to the same degree as those that define them and where there is a mis-match, those towns are the most likely to struggle. The rise of online is the most obvious manifestation of ongoing consumer evolution, but this is actually part of the fabric of modern-day retailing rather than the destructive force it is often portrayed to be. The future is not about online, nor is it about stores. It is about both and how the two seamlessly interact. Online is often an ally to the high street, rather than an adversary.
Make no mistake, Covid has rocked the retail market to its core and put even more pressure on an already highly challenged market
Stephen Springham, Knight Frank Head of Retail Research
Has this been exacerbated by Covid?
Retail definitely came into Covid-19 with pre-existing conditions. We have previously identified ‘10 Structural Failings in Retail’ in our report ‘The Price of Change’. Oversupply and the rise of online, as I’ve already mentioned, are just two of these structural challenges. Make no mistake, Covid (and lockdown particularly) has rocked the retail market to its core and put even more pressure on an already highly challenged market.
But if anything, Covid hasn’t really bought anything new to the table, but is merely accelerating structural change that's already taking place. That doesn’t make it any less painful, certainly in the short to medium-term, but the sooner the retail market addresses and resolves its deep-seated issues, the better.
What will developers have to do to convert space? Is it particularly challenging?
It will vary by location, some retail repurposings will be far more straightforward than others. As I’ve already mentioned, there are a number of divides that have to be crossed, some will be more onerous and challenging in certain locations than others.
In the past, planning has often been a constraint, but hopefully less so now as the wider planning regime is being relaxed. As well as the generic divides, there is also the possibility of unforeseen “curve balls”, such as an unexpected application for a building to be listed, for whatever reason. If upheld, this can obviously be a major spanner in the works for the whole redevelopment process.
In your eyes what does the ‘ideal’ look like?
If there is one lesson we have surely learnt in retail, it is that there cannot be a “one size fits all” solution to the high street. Every town centre is different and has its own story to tell. And its mix of uses has to reflect that. Too many town centres haven’t embraced this notion and haven’t capitalised on their full potential.
The role of retail within a town centre will vary – in some, it will continue to dominate, in others it will assume a more supporting role. National retail multiples will continue to be the mainstay of some retail destinations, others may have a greater bias towards local or independent traders. Some will have a mix of both.
One common denominator for a successful town centre it is people. People define what makes a location tick and are its very lifeblood. Selective repurposing of retail space will actually bring people back into town centres in a way that brings holistic benefits for all use classes. It’s not a straight substation, it’s more about achieving the right blend.