From escape rooms to a place to host repair and reuse workshops, landlords are finding new uses for empty shops – proving that necessity really is the mother of all invention.
The pandemic has heaped misery on bricks-and-mortar retailers. Vacancy rates on the UK’s high streets stretched to a six-year high after reaching 10.8% in July, according to Springboard. In Greater London, the number of empty shops grew by nearly two-thirds.
Reinvention is key, and it is now more important than ever to be forward-thinking in repurposing those spaces. Landlords are already diving into a pick ‘n’ mix of different concepts that could rejuvenate city centres. EG takes a look at some of the new uses which could replace unwanted retail space in the years ahead.
Places to live
Post-lockdown, momentum has gathered around retail-to-residential opportunities. Notably, John Lewis Partnership is in talks with third parties on converting excess space into mixed-use, affordable rental housing while it seeks to reposition its estate.
“There is an opportunity to create… more residential in cities,” Eric Adler, president and chief executive of PGIM Real Estate, tells EG. “There are housing issues in most of the world’s large cities. It’s not like once things normalise again, there isn’t a need for a conversion of existing space into residential.”
Beyond this, investment managers and pension funds are using the rising obsolescence in retail spaces to take advantage of the growing ageing population. City developments underway include Legal & General’s retirement arm Guild Living’s schemes in Bath and Uxbridge – the latter will convert a Halfords and Wickes store into its first retirement development in London. These aim to tackle social isolation and improve residents’ health and wellbeing.
Departmental desks
Notwithstanding the big shift to home-working, department stores are largely being turned into offices to fill swathes of surplus space in major city locations. On London’s Oxford Street, John Lewis and House of Fraser have proposed part-conversions to office space, while Fenwick on Bond Street has done the same. These have followed Debenhams, which last year turned parts of its West End store into space for its head office.
This could turn out in their favour, even if the current trends indicate otherwise. Toscafund chief economist Savvas Savouri argues in a September note that when it comes to occupational demand across the UK office market, 2021 “will not be recessionary but… economically expansionary”.
Savouri predicts a “welcome change” for city offices – one that erases the capital’s white-collar “poultry battery farm” vibe, to offer workers a main office hub with serviced office settings closer to home. “Far from… office take-up falling, one should expect an increase,” he adds.
The great escape
Despite absorbing the impact of lagging footfall, some leisure concepts are capitalising on favourable terms created by low demand. Escape Hunt, for one, is taking advantage of plummeting retail values to roll out more owner-operator sites. It already has a presence in cities including Birmingham, Bristol and Leeds, and completed a deal for its 12th site in the spa town of Cheltenham in September.
“In each case, we have been able to secure a prime retail site on favourable terms, which is testament to… the opportunity afforded by the current retail property environment,” Escape Hunt’s chief executive Richard Harpham said in a market update.
Other leisure operators planning to use competitive socialising to get back on track include BoxPark, which has outlined plans to boost its existing offers at its London locations. It is also seeking sites for its BoxOffice and BoxHall concepts, with scope for repurposing city centre retail and leisure venues measuring up to 25,000 sq ft.
Liminal spaces
The idea of the 15-minute city has long captured imaginations across the world, but is enjoying a resurgence in interest as the pandemic unfolds. Paris and Dublin are among the cities advocating the idea as a route to recovery.
In such drastic densification, buildings could offer multiple commercial uses at different times of the day and week. C40 Cities – a network of the world’s biggest cities – points to the now-closed De School in Amsterdam as an example of how these could look. By day it was a café and library; by night, it was a club. Retail and leisure spaces could therefore become more fluid in the long run.
On a smaller scale, “meanwhile uses” continue to serve as a stopgap for empty retail premises. And there is arguably no better type of space for trialling concepts that will define our future places.
“The crisis is accelerating the thinking [around] functional obsolescence,” says Matthew Weiner, chief executive of U+I. For Weiner, opening sites up for “worthwhile” use creates social value “from day one, not from the moment the [scheme] finishes”. Its Mayfield development in Manchester has hosted an independent food market, live music concerts and an indoor cycle and BMX arena. “It’s about getting yourself into the community, but also about bringing back places,” he says.
Recycling ideas
The Covid-19 crisis has put sustainability firmly in the spotlight, and one of the ways this could manifest through surplus retail space is through zero-waste initiatives. Take Berlin as an example – as part of its waste masterplan, the city government has temporarily taken up the third floor of a Karstadt department store to offer a second-hand goods marketplace, which doubles as an education centre with repair and reuse workshops. Expansion plans are in the works.
In Sweden, IKEA is piloting its first second-hand, refurbished furniture store in greater Stockholm later this year. Jonas Carlehed, sustainability manager for IKEA Retail Sweden, said in September: “If we want to reach our sustainability goals, we have to challenge ourselves and test our ideas.” Perhaps it is not outlandish to think that these efforts could catch on in the UK, too.
Point of view: Nathan Rees, partner, Shoosmiths
The need to repurpose elements of the UK’s existing stock of retail property has been on the agenda for a number of years. With many retailers reducing their space requirements in response to various factors, including the challenge of online shopping and increasing costs such as business rates, it is almost inevitable that some creative thinking would be needed.
The Covid-19 pandemic has thrown these issues into the sharpest possible relief, and while successful retail schemes will, in time, thrive once more, it is likely that new uses will need to be found for certain properties, where retail (or exclusively retail) uses are not viable.
We must ensure that our town centres – and (often forgotten or not mentioned) out-of-town schemes – are able to provide meaningful facilities for consumers, and suitable opportunities for ambitious businesses to grow.
An element of flexibility is crucial to this. As a cautious lawyer – but also understanding the investor/funder dynamic – it’s important to say that this has to be an appropriate level of flexibility. The pandemic has taught us that we cannot predict what is around the corner, and occupiers have to be able to meet the challenges they may face, to adapt to new ways of working or even a completely different offering.
It’s likely that in some areas some brave decisions will be needed to fulfil these ambitions. Landlords, tenants and funders will need to work collaboratively to understand the others’ position, and of course will then need to work within the (currently dramatically altered) planning regime, in particular so that areas facing the harshest challenges might be transformed.
