The pandemic has accelerated changes in UK shopping habits, creating a 20-40% oversupply of retail space.
COVID-19 has been devastating for physical retail, but the UK’s mountain of unwanted shop space did not come out of the blue. Lockdowns accelerated existing trends, including the gutting of communities and town centre shopping areas, the growth of remote working and the irresistible rise of e-commerce. Estimates vary, but a broad consensus view is that the UK now has between 20% and 40% too much retail space.
The Size of the Problem
Since 2018 around 27m square feet of retail space has been vacated, a net loss of over 8,000 trading stores over the past two years. The collapse of Debenhams alone created a further 12.5m square feet of vacant space. That’s equivalent to 160 football pitches.
Vacancies are likely to increase further. Around 65% of retail and food and beverage leases signed since 2015 will expire or be broken by 2025, according to EGI, while rents have fallen by over 15% in the past decade and average lease lengths have plunged by 28%. If current trends continue there will be 300m square feet of excess retail space by 2030.
Has physical retail had its day or can it offer something that e-commerce lacks? And what should we do with the UK’s acres of empty retail space?
What Will Future Retail Look Like?
E-commerce is convenient but it lacks physical retail’s sense of occasion, customer service and immersion. We may therefore see a stronger-than-expected recovery in take-up of retail space post-pandemic, although not across the board. Larger cities are well placed to absorb the economic impact of the pandemic, but smaller urban centres may need a long-term, creative approach to stimulating recovery.
In all cases, however, developing long-term uses for retail spaces that enhance the urban environment is more likely to succeed with collaboration between customers, residents, tenants, local authorities and investors. The effects of decisions made now will be with us for decades; some of today’s biggest urban headaches are rooted in planning decisions from the 1960s and 1970s.
The most fruitful route to regeneration and sustainability is likely to involve planned mixed use development, with close attention to creating a sense of purpose and place. The keys to success are likely to lie in economic and demographic diversity and local character that contrasts with the bland offerings of traditional shopping centres.
Cultural, health and education facilities are likely to provide a bedrock for sustained footfall and we are also likely to see more space being provided for independent shops. These hybrid spaces will have multiple uses, including shopping, leisure, culture, working, housing, education, healthcare, tourism and transport - or simply hanging out in attractive places.
The Home/Office Conundrum
One of the great unknowns is the future of town centre retail that relies on footfall from office workers. Surveys show that the majority of workers would welcome a home/office hybrid working model. We do not know how this will translate into future demand for office space post-lockdown, but office workers clearly want greater flexibility and a better work/life balance.
After spending months at home, people may want a separation between work and home, and space where they can think creatively and collaborate with others. A halfway-house between commuting and WFH could be local co-working spaces, perhaps created by repurposing redundant department stores and retail units on suburban high streets as local coworking hubs.
Social Value Enhances Economic Value
One of the most tantalising glimpses of what the future may bring is taking place in Stockton, where a 1970s shopping centre is being replaced by a riverside park . Could Stockton Borough Council be on to something?
Our cities would be unimaginable without their shared green spaces, many of which date from the 18th and 19th centuries. They are great examples of long-term sustainable development. To assume that do not generate economic value is to overlook their role as life- and health-enhancing social hubs for residential areas, local businesses and tourism.
Common sense and anecdotal evidence suggest that green urban spaces can generate significant lasting economic value but, so far, hard evidence is thin on the ground. Now that sounds like a worthwhile subject for a research project.
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