Transforming retail spaces: when one door closes, another opens
Every day last year, 47 retail sector businesses shut up shop for the final time, resulting in 17,145 high street shops closing for good, according to the latest 2022 figures. Yet, with a little creativity and vision, there are many ways to repurpose empty retail spaces to meet the needs of the local community and revitalise the local economy.
A change in culture
The disruption and uncertainty caused by the arrival of department stores in city centres is now mirrored by their departure. Out of town shopping and the growth of e-commerce consumerism have resulted in substantial changes in the retail landscape. Online retail sales averaged at 19.2% in 2019; they now sit at 25.2% as of the end of April 2023 (ONS).
A shift in working habits post-pandemic has also undoubtedly had a permanent impact on town and city centres alike, with hybrid-working dynamics becoming increasingly normal. Whilst this might paint an uninspiring picture, the high street remains an optimistic breeding ground for growth and development, with the overall footfall in the week to 19 March 2023 at 104% of the level in the equivalent week last year (ONS).
The drop off in retail sector engagement is not due to the lack of customer availability, as once thought; instead, it reflects the growing change in consumer trends as we look to e-commerce instead of traditional retail consumption. The effect is that the high street is now booming with individuals seeking an alternative high street experience, as they begin to stray away from the ageing clearance sales in department stores, leaving behind a wealth of opportunities in the form of empty retail spaces.
Businesses and developers alike are now challenged with adapting their thinking to suit the needs of the ever-changing consumer and capitalise on the evolving UK high street.
Bucking the trend, and transforming retail spaces into dynamic leisure-led hospitality experiences, is Gravity Active Entertainment. It sought to repurpose an old Debenhams department store located within Liverpool One. With £10 million investment, a 10,000 square ft go-karting venue replaced the department store, which was once the joint flagship tenant along with John Lewis.
A change in use class
On 21 of July 2020, the government published The Town and Country Planning (Use Classes) Regulations 2020 which came into force on the 1st September 2020. The use classes essentially determine how a property can be used and developed.
The revised 2020 regulations sought to bring together existing classes of shops, financial and professional services, restaurants and cafes, as well as parts of classes relating to non-residential institutions and assembly and leisure (such as indoor sporting activities) into one single use class.
The effect is that this change allows for alterations of use without the need for planning permission, meaning that the Woolworths on your high street which has been empty since 2008 can now become the latest and greatest fitness facility, or even the next best pizza restaurant in town.
Lease restrictions
Where a property is leased, there may be restrictions on what the property can be used for, irrespective of the position with The Town and Country Planning (Use Classes) Regulations 2020. On that basis, if any such change of use could be a viable option, it is important that the provisions of the lease are considered, and that the landlord is approached in the first instance regarding any possible change of use that may be required.
Transformation options
There are many ways to repurpose empty retail spaces to meet the needs of the local community and revitalise the local economy.
- Fitness or wellness studios: repurposing to fitness or wellness studios can be an extremely cost-effective way of dealing with empty retail spaces. Providing space for yoga, Pilates, or other exercise classes capitalises on low fit-out costs, but also helps to promote healthy living amongst the local community.
- Food and beverage outlets: perhaps the most popular change of use in retail properties over the past decade has been the boom in food and beverage outlets. Previously industrialised spaces can be easily converted into restaurants, cafes, or bars, providing new dining options to stimulate the local economy.
- Residential properties: in some cases, empty retail properties can be converted into residential properties, providing much-needed housing in urban areas. This could be especially useful in areas where housing is in short supply or where there is a high demand for affordable housing.
- Co-working spaces: whilst hybrid-working could substantially reduce the turnover and profitability for traditional city centre retail and leisure businesses, it could also generate opportunities for co-working office spaces. Empty retail properties can be repurposed as co-working spaces where people can rent desks and office space to work. This could be particularly useful for small businesses or freelancers who need a professional workspace without the high costs associated with traditional office rentals.
- Dynamic leisure facility: an increasingly attractive option for rejuvenating retail spaces is the ability to create multi-faceted leisure facilities. Transformations of ageing retail stores into bowling, indoor karting, and mini golf have been a particular focus in the current market and offer a range of opportunities for the consumer.
All is not over for the UK high street; with the growth of e-commerce and hybrid-working dynamics it would be too easy to view retail spaces on UK high streets as dilapidated shops with little to no customer engagement. Instead, this change in consumer lifestyle offers opportunities for businesses and developers alike to engage with new trends and mirror their development strategies to fit the demands of the consumer.
Key takeaways
- Be creative in site development
- Take advantage of the changes in regulation - do not be limited to the current market which the empty retail shop operates in; explore new realms to attract more consumers
- Approach your landlord in the first instance in relation to any proposed change of use.
If you’d like to discuss any of these issues or have questions about the article, please contact Gareth Birch or Andrew West in the commercial services team.
Gareth Birch
Associate Partner, Real Estate
T: +44 (0) 161 393 9017 M: +44 (0) 7949 033514
Gareth acts for a number of retail, investor and developer clients, including several household name brands with large retail and investment property portfolios. Gareth is valued by clients for his commercial and pragmatic advice and is recommended in Legal 500 for real estate law. He is also listed as “Up and Coming” in Chambers 2023.
Harry Jenkins
Paralegal, Real estate
T: +44 (0) 161 393 9084 M: +44 (0) 7590 431243
Harry supports the real estate team in providing client focused strategic advice on a full range of commercial real estate matters. His work covers a variety of acquisitions, disposals, and sale and leaseback transactions. He acts as a direct liaison between partners and corporate occupier and developer clients. Harry has particular experience in portfolio management, particularly in the context of retail asset development.
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