In his major ‘new deal’ speech last week, where he stood in front of a lectern with the slogan of ‘Build, Build, Build’ and set out how the UK is going to recover from Covid-19, Boris Johnson outlined a number of proposed changes to Britain’s seven-decades old planning system.
This included a relaxation of planning rules to make it easier for land and buildings to be converted quickly, with developers granted the ability to change vacant shops to homes, and builders able to demolish vacant shops and build homes in their place, without planning permission.
New regulations will be implemented which will allow for buildings and land in town centres to change use without requesting planning consent, while new homes will be able to be created from empty buildings. As an example, struggling high street stores that due to the coronavirus crisis have been forced to shut their doors permanently could be transformed without needing permission from the authorities. These changes are set to come into effect by September.
Some believe this represents a huge opportunity for investors and developers, with potentially transformative changes to the nation’s high streets which have been so badly damaged by the coronavirus crisis. In the last week, the economic toll of the pandemic has started to show, with many companies beginning to lay off staff despite the ongoing support of the furlough scheme.
Firms in the retail, hospitality and restaurant sectors – which make up such a big chunk of high streets up and down the country – have felt compelled to take drastic action to keep their businesses afloat, with Upper Crust owner SSP cutting up to 5,000 jobs, 1,900 jobs being cut at the Casual Dining Group (owners of Bella Italia and Café Rouge), and up to 700 jobs being lost at Harrods.
In total, more than 12,000 jobs were slashed in the space of just 48 hours last week as the devastating economic reality of the Covid-19 pandemic reared its ugly head.
John Lewis has announced that it will close stores but has not revealed how many jobs will be cut, while Topshop owner Arcadia, shirt-maker TM Lewin, WH Smith, Bensons for Beds, Wrights Pies, Virgin Money, Clydesdale Bank, Yorkshire Bank, the Adelphi Hotel in Liverpool and Norwich Theatre Royal have also confirmed plans to reduce jobs.
Businesses across the country have been hard hit since lockdown began on March 23, but the above sectors have been particularly impacted. And, although restrictions are being gradually eased (with non-essential retail allowed to reopen from June 15 and bars, restaurants and pubs reopening on the weekend just gone), demand and consumer sentiment remains low.
Until a vaccine or successful treatments are found, and while social distancing measures stay in place, that is likely to be the case for some time, with footfall remaining down. Of course, the struggles of the high street is nothing new – the decline has been steadily happening for years as the rise of internet shopping and high rates/rents have forced many established names to go out of business – but could it also be an opportunity for regeneration and new life to be breathed into run-down areas?
According to Blick Rothenberg, a leading tax and advisory firm, the relaxation of planning rules announced by the Prime Minister could lead to big changes on the British high street and real opportunities for landlords and developers.
Heather Powell, property partner at the company, commented: “The changes will allow owners of recently vacant properties to change their use without applying for planning permission. This could lead to a huge change in our high streets, retail parks and commercial areas.”
She added: “Landlords who feel they have been beaten up both by the government and by tenants have now been given a huge advantage. They will soon be able to not only evict tenants but switch to a more lucrative use of their properties.”
Powell said that landlords’ hands have been tied in negotiations with tenants due to the restrictions imposed about the collection of rent. “If tenants do not pay up after the end of September (and how many non-paying tenants will be able to pay the March, June and September rent in full in October?) the landlord can now evict them and switch the use for their properties,” she added.
“The Prime Minister clearly hopes many properties will be converted to new homes, but alternative uses are much broader. Landlords can convert their premises to cafes, offices – or new homes. If they do not have the appetite or expertise to undertake the work themselves, they can sell to a developer,” Powell continued.
“For passive investors, or those who have invested via SIPPS, sale to a developer may be the only option, but it will allow them to exit from an investment where returns have plummeted.”
For owners of shopping centres, this could be the lifeline they need to avoid Intu’s fate, Powell said. (Retail giant Intu recently fell into administration after crunch talks with its lenders were unsuccessful. It had been struggling before the pandemic hit, but Covid-19 tipped it into the abyss.)
“Large regeneration schemes that have fought their way through the planning system have shown what is possible,” Powell advises.
“Landlords should be assessing their options now – and developers should be speaking to their funders and investors so that they are well-placed to take advantage of these opportunities. It might even be good news for the Intu shareholders – they may just get a few pence back on their shares!”
Sandra Graham, planning and licensing solicitor and notary public at South of England law firm Trethowans, also commented on Johnson’s planning changes. “This is an innovative way to revitalise failing high streets and bring communities back into town centres, which can only improve social and cultural hubs. We have seen under Covid-19 the ability to communicate and socialise is so important to people’s health and well-being. This, in turn, can help improve inclusivity and eradication of isolation and loneliness. A social and cultural hub leads to a happy community.”
She said the proposals almost go full circle back to what town centres were before ‘globalisation of the high street with brand names, which are now turning to servicing customers online’.
“There is an ever-growing need for housing and the utilisation of existing brownfield sites and unoccupied retail premises can help satisfy that need without further encroachment on our disappearing green spaces, which we have seen especially during lockdown are so important to retain for the provision of tranquil, peaceful refuges where one can connect with nature,” Graham added.
“For far too long the planning system has been increasingly hampered by red tape and regulations causing delay and cost to the delivery of housing. It is hoped that Boris’s plans can lead to a refreshing new era in housing provision for the positive benefit of our communities.”
We recently carried out a Q&A with Preston Benson, the founder of regeneration specialist Really Local Group, to ask whether the impact of Covid-19 will lead to an increase in retail to resi conversions. You can read the full interview here.