Large city centres and local high streets all have one thing in common: continuous change. On-line shopping and the impact of the pandemic – which caused footfall an in-shop spending to drop – is seen ever more clearly as a threat to physical stores on the high street. However, the pandemic merely accelerated how people shop.
Many high streets have empty shops or feature a proliferation of nail bars, charity shops, vape stores, barbers and other low-quality outlets. It doesn’t make a very exciting high street.
How do we change this high street into a more attractive high street in the long run, how do we add alternative uses that revitalise the local high street in a sustainable way so they become hives of activity and a pleasant place to be?
How can investors convert the huge number of stores that have been vacant for a long time? The Local Data Company shows 37% of vacant stores have been vacant for over 4 years. It has been suggested frequently that perhaps nearly a third of retail units will have to go on to find a new use. How do we make that happen across the 160,000+ units that need converting? Can we make it work for all?
Ownership of high street stores is mostly very fragmented, so community engagement and a vision for the town centre needs to go hand-in-hand with cooperation of residents, landlords and tenants alike. The new uses need to fulfil a local need. Every high street has unique needs. One might need more residential or community use space, another might require healthcare, business or office space.
Not only do you need a long-term view and endless patience and dedication, but the numbers also still need to stack up. Retail units still often have rental levels that lie above those for other uses, and together with refurbishment cost a funding gap arrives.
If the minimum required rate of return on a conversion is not achieved, the unit often simply remains empty. There is a need to create thriving local communities offering a nice, clean and safe environment, employment, a broad rage of shops and facilities that serve all in the community. Where the finances don’t stack up for property owners the government might have to step in, or landlords that are willing to sacrifice a level of return as part of their impact investing or ESG drive.
A government-backed vehicle that is willing to take on vacant space and find alternative uses for those spaces – and carry some of the income risk – for the benefit of the local economy as a whole could be transformative.
It requires grit, dedication and a long-term view. Retail rents will fall, and other uses will become within reach over time. Do we have to wait for the destruction of the high street to see retail rents fall far enough to make other uses more viable? We need foresight and dedication, and deep pockets of landlords keen to make a positive impact on society as a whole.
Cléo Folkes, CEO of Property Overview, provides training and consultancy to institutional investors and those companies that provide services to them. Courses include “Understanding Property” and “Deeper understanding of real estate cash flows”.