Peter Sloane, chair of Love to Rent, a portal specifically designed to showcase Build to Rent (BTR) developments, believes the vast changes forced on our social, domestic, leisure and shopping habits by Covid-19 have brought into sharp focus the dilemmas that our big retailers face.
“Having spent years fighting each other to create bigger, flashier and more costly retail cathedrals and create the ultimate shopping experience, retail giants such as Asda, Sainsbury’s, Tesco and more recently the high street’s staple big guys like M&S, John Lewis and Debenhams realise that, with the exponential explosion of convenient and Covid-19-compliant internet shopping, these huge retail spaces are dinosaurs that will (as in Debenhams' case) cause their destruction,” Sloane says.
“In fairness, this process has been slowly unfolding for years; Covid-19 has acted as an accelerant,” he adds.
Alternative uses, including residential use, have been on the cards for years already, he argues, with Tesco, Sainsbury’s and Waitrose including residential use above new stores in Woolwich, Streatham, Vauxhall and Raynes Park, respectively.
“Tesco has used their own development arm to provide hundreds of homes, while Sainsbury’s joined with housebuilder Barratt and Waitrose with the housing association L&Q,” Sloane says.
“German retailers, Lidl and Aldi, have also included residential use above some of their new stores. This is not only a cost-efficient option but it also helps get schemes through planning.”
He said Love to Rent recently joined discussions with John Lewis, soon to be entering the fast-growing BTR market, ‘after seeing synergy in providing their excellent furnishing reputation to new homes’.
“IKEA is already linking their furnishing reputation to Sugar House Island in London’s east end,” Sloane adds. “Looking for alternative income streams and value will be a common sight for many high street names in the coming years, having seen terminal disruption to their high street homes.”
Is the process easy?
The idea of converting disused retail stores into thriving residential hubs is a sound one, but there is a big gap between concept and reality. Converting stores primarily designed for retail into safe and habitable homes isn’t a simple task, and one that requires innovation and skill.
“Due to the current configuration of a typical departure store’s layout – i.e. expansive floor plates with minimal natural light – the conversion from retail to residential would be difficult. In order to heed the lessons of office to residential PD conversions and avoid substandard residential units, a pragmatic approach to planning is needed,” Andrew Boyd, partner at property consultancy and auction house Allsop, said.
“Authorities need to remember that retaining outdated buildings which aren’t viable for conversion into residential could also be a missed opportunity to modernise and rejuvenate our high streets.”
No respite for high streets
If things carry on the way they have been, many high streets across the UK will be crying out for alternative uses before too long to ensure they don’t fall into terminal decline.
New research by the personal financial experts at money.co.uk has revealed that Britain is set to shop online and go big on this year’s Black Friday sales.
Some 77% of adults in the UK are planning to bag a bargain during this year’s Black Friday bonanza, the data found. However, it also revealed that, due to the coronavirus pandemic, an overwhelming number of shoppers will purchase their Black Friday bargains online this year – steering clear of high street shops as UK restrictions tighten again.
In all, 85% of those surveyed said they would either shop exclusively online or a mix of online and in store this year, with just 0.3% spending exclusively on the high street.
Salman Haqqi, personal finance expert at money.co.uk, said: “While it is encouraging for the economy to see that shoppers are set to spend more than ever this year, it’s going to be a Bleak Friday for the UK high street, with just 0.3% of people set to spend exclusively in physical stores.”
He added: “50% said they would shop exclusively online this year with a further 35% saying their shopping would be done mostly online.
Recently, as fears of a second wave have grown, high street footfall has dipped again after a brief rally over the summer and early autumn months. Local lockdowns and tighter restrictions across the UK are putting consumers off, with the UK recently recording an annual decline in footfall of 32.9% - and that was starting from a point where the high street was already in trouble, not a position of strength.
Aside from John Lewis and the case study we explored in Part 1, other commercial to residential conversions are taking place – a trend that is only likely to grow in 2021 as remote working continues to dominate and restrictions look set to remain in some shape or form.
North West developer The Heaton Group, for example, is restoring a former bank into luxury living space in Stretford, Greater Manchester. The bank closed in 2016 and will now be redeveloped into 13 high-end apartments.
In London, meanwhile, some 137 new homes are set to be delivered in Chiswick, West London, where a vacant office building is being redeveloped by Great Marlborough Estates.
In July, investment firm LCP also announced that the last apartment in an office to residential conversion in Oxford had been snapped up by a purchaser, with the first floor of the office building being converted into two flats while the existing flats will be refurbished to a high standard.
All the evidence suggests that commercial/retail to resi conversions will continue to gain traction while the pandemic continues to bite.