What does the future hold for the evolving High Street?

Saving the High Street seems to have fallen off the radar as the harbingers of doom have understandably shifted focus to the Cost of Living Crisis and Energy Poverty. As we know, the retailing sector has been facing unprecedented structural change and disruption, but the recovery of the High Street is further affected by current economic conditions. Yet, it is not all doom and gloom as revealed by our research which studied changes in property use and ownership in five city centres (Edinburgh, Glasgow, Hull, Liverpool and Nottingham) between 2000 and 2021. The High Street has and will continue to evolve. Reflecting on the findings of our study, we see the issues are more about the pace of change and adaptations being right for the needs of society rather than the market being unresponsive.

A key change has been the increase in the richness and diversity of retail centres although the variety in property use is spatially uneven. Unmissable has been the contraction in comparison retailing that once dominated city centres. Our findings show an average 9.1% fall in comparison shops between 2010 and 2017 due to the demise of unprofitable retailing organisations who have not effectively embraced omni-channel retailing or used technological advances to make their operations more cost-effective. Mass market clothing and fashion retailers have been the hardest hit, not just because these sectors have experienced intensifying competition from online retailers but their customary expansive High Street presence also left them exposed to rising operational costs.

The contraction in comparison retailing has been offset to some extent by the rise in ‘service’ focused property uses (our figures reveal that food and drink outlets grew in our case study cities on average by 55.2% 2000-2017; 21.3% of the rise between 2010 and 2017) and ‘personal’ services (for example, hairdressers, tattooists and beauty spas). The growth in these areas, particularly leading up to and through the pandemic, has been driven by independents, helped by the loss in confidence that landlords have towards multiple retailers and their weakened financial standing. Entertainment, leisure, and recreation property uses have also grown in recent years, lagging behind the expansion in hospitality, but helped by the rise in available and cheaper large spaces as our interviews show that landlords have become more flexible in the lease terms and types of tenants they accept. Food halls, health practices and educational facilities are other types of property uses on the ascendance although our research found that when new retail or leisure experiences emerge, these innovations are quickly replicated e.g. Takeover Thursday, and competitive socialising activities such as darts and axe throwing. All are adaptations that are contributing to the increasing richness and diversity of our town and city centres albeit occurring slower than the rise in vacancy rates.

Shopping centres are also adapting into hybrid developments, many forced to as they have lost their department store anchors. The initial approach was to fill the emerging holes with food, beverage, entertainment and leisure uses but no sooner was one hole filled, another popped up. Akin to firefighting, some shopping centre owners are now thinking more strategically, with proposals emerging to demolish parts or all of in-town shopping centres to re-carve them into mixed-use neighbourhoods. Transformations that are being encouraged, in part by stubborn long-term vacancies and the higher cost of heating and operating enclosed shopping centres; in part by the fall in property values making redevelopment a more viable option although building cost inflation and rising finance costs currently threaten to undermine this trend.

Heritage is now perceived as central to place-identity and place-attraction. While many retail chains have become more selective about the town and city centres in which they locate, they have held on to their preference for regular shaped units, ideally on one level. The unusual and irregular units typically found in heritage buildings on the High Street are now popular with independent and luxury brands. This growing demand for quirky space from independents and recognition that place-attachment exists have motivated the repurposing of vacant iconic former department stores. Yet, technical challenges and higher costs exist when redeveloping deep-plan buildings. The redevelopment barriers are particularly high if the structure is listed and new entrances, building servicing and signage are required.

Adaptations in city centres have not only created greater economic variety. In all five retailing centres we investigated there has been an increase in residential and student accommodation, encouraged by city living strategies designed to strengthen city centre resilience. The rise in residential units, typically in the form of upper floor conversions geared towards the less affordable end of the apartment market, has been greater in Hull, Liverpool and Nottingham than the Scottish centres, reflecting the permitted development rights introduced in 2014 in England. Accompanying the new housing has been more food stores, off-licenses and convenience stores although neighbourhood medical, social and community services have not kept pace with the growth in housing.

Lauded the solution to the housing shortage, repurposing former High Street retail space into housing is not an easy option. The difficulty is not only providing attractive and affordable accommodation and adequate social and public sector services but the green public realm necessary to improve the connectivity of the city and encourage more active forms of transport. Careful consideration and controls are also needed to avoid the tensions that can arise between some neighbouring land uses. For example, situating homes next to noisy night-time economy properties understandably leads to conflict whereas the differences in services and retailing sought by permanent and temporary residents can create less obvious tensions. In fact, the strong protection given to residential neighbours was found in our research to be a barrier to the repurposing of redundant retail properties into commercial use when in close proximity to housing.

The richness and diversity of ownership in our retailing centres have also increased as disinvesting financial institutions have steadily been replaced by overseas investors and smaller investors. We estimate the largest group of property owners in 2017 to be unlisted UK property companies with private individuals being the second largest group, holding 16% of the property stock. While greater variety in ownership may increase competition that can lead to lower market rents and innovative retail formats, ownership fragmentation makes co-ordinating and incentivising urban change harder, particularly as these smaller investors rely more on costly debt financing than the larger equity-rich funds.

For all investors, active asset management has become crucial to de-risk retail investments, but worryingly some smaller landlords did not appreciate this when they originally invested in the market. The implications of this go beyond managing the revitalisation of the High Street as greater ownership fragmentation also increases the difficulty for the UK retail market to meet the Government’s net zero carbon targets. Savills estimate 83% of the existing retail stock needs improvement to comply with the stringent Energy Performance Certificate (EPC) B target set for 2030, but 60% of this stock is held by smaller investors who will struggle to achieve the EPC target due to limited access to funding and advice. Without this investment in existing retail units, the High Street is likely to see a further rise in redundant and vacant retail units.

Our city centre High Streets are evolving by increasing the variety in property uses and local economy but further challenges lie ahead. Investment is needed to make necessary changes to the building stock and infrastructure but the rising cost of borrowing, investment uncertainty and general economic slowdown are likely to slow, at least momentarily, housebuilding and the repurposing of surplus retail space.

Some changes announced in the Chancellor’s Autumn Statement such as the Business Rate package (and more recent revaluation that kicks in in April 2023), will help retail, hospitality, and leisure businesses struggling with rising operational costs while reforms to the Solvency II regime should encourage insurance and long-term savings funds to invest more in property and support the levelling-up agenda.  Yet, little consideration has been given to the smaller owners who now dominate. Did the Chancellor miss the opportunity of using Investment Zones to provide tax-reliefs to support net zero carbon and other necessary retailing centre improvements?

The British Property Federation have championed the introduction of Town Centre Investment Zones to encourage property and business investment through the provision of spatially defined tax-reliefs, grants and subsidies. However, our findings highlight the need for the necessary transformations to be managed to avoid unintended effects. This could have be achieved with the use of investment zone masterplans that capture the needs of local stakeholders, co-ordinate change and enable the effective use of resources. Furthermore, such plans for change could provide the opportunity to manage and optimise the co-location of new housing and commercial activities, and be employed to create a framework that encourages a more balanced property use and service mix that appropriately supports sustainable city living.

– Allison M Orr and Joanna L Stewart

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