Introducing residential into retail locations has been touted as the solution to the UK housing crisis and failing high street. But in an economically fragmented country, does one size fit all?
Inflammatory press about the “death of the high street” has been centre stage in the UK’s retail story for some time. There’s no question that the retail landscape has changed dramatically in the last 10 years, and many traditional retail locations are struggling to adapt, but “death” suggests a termination and obliteration, as though our high streets will simply fall off the map. “Evolution of the high street” is a more accurate reflection - it’s about keeping up, not giving up. Evolving can mean finding new purposes for locations, but what are we repurposing to?
The obvious choice in town centres is to convert retail into residential use. This would not only satisfy the widely-reported need for more housing, but also meet the growing demand for sustainable travel and convenience living. So, with many locations seemingly ready for redevelopment, why aren’t more underway?
Not all repurposing projects are created equal
The reality is that some repurposing projects are more straightforward than others. While construction costs rise (and we cover the developer’s many considerations and expenses later), residential values are mostly plateauing or, in some cases, dropping.
Each town across the UK is different to the next and has to be treated as such. With individual micro-economies, communities and trends to consider, the only way to find a successful solution to benefit landowners, occupiers and the local community, is to scrutinise every location separately. Anyone considering a repurposing project must weigh-up complex factors in detail.
We look at how some of these factors influence three typical UK retail offers: high streets, shopping centres and foodstores.
High streets - greater than the sum of their parts
The high street is undoubtedly the most delicate repurposing task of our trio. To even refer to “the high street” as one entity is misleading to begin with. Most high streets are a mosaic of individual shops, owned by individual landlords. It would be near-impossible to unify these owners in one repurposing project; and that’s where the Compulsory Purchase Order (CPO) comes in.
Jenny Miles, Partner at Cushman & Wakefield clarified, “More local authorities are considering [CPO’s]. Spelthorne Borough Council approved the principle of using a CPO to acquire a section of Staines High Street to enable a residential development. On a larger scale, Barnet Council, via its North Finchley Town Centre Framework SPD, highlights how the retail & leisure offer on North Finchley High Road has grown too long and is at risk of becoming unwieldy. The comprehensive redevelopment of identified opportunity sites along the High Road have the potential for 2000 homes.”
But even if the issue of disparate ownerships can be resolved, those town-specific economies, communities and trends we mentioned still have a role to play.
From shopping centres to housing centres?
When it comes to shopping centres, obstacles such as disparate ownership don’t exist, as each centre is owned by one landlord or a joint venture. While a single ownership means complete unity of control and ability to deliver change, the confines of the existing building design may not allow for repositioning a section or all of a shopping centre into residential use. In these circumstances, the only way to repurpose is to demolish first, and so residential use may not be the most profitable solution. This is something we review with clients in detail, and alternative uses may generate better returns such as healthcare facilities, a hotel or a leisure offer.
Areli is leading the charge with ambitious plans for the Nicholsons Shopping Centre in Maidenhead and more shopping centres ahead. intu Properties are also proactively responding to the market, having recently announced plans to build 1000 homes at intu Lakeside to replace House of Fraser and a surface car park.
More than a foodstore
There is an admirable string of successful repurposing projects in the UK foodstore sector, as these sites naturally match the needs of a viable repurposing project: they are usually in valuable residential locations, occupying large sites (including surface car parking) and often already in single ownership.
Our client, Morrisons, is carrying out foodstore repurposing on the grandest scale in Camden, north London. The massive 8-acre site now has planning consent for a 970,000 sq. ft redevelopment including 570 residential units, a new store and a 110,000 sq. ft office. Jack Simmons is Cushman & Wakefield’s Residential lead on the project, “The Morrisons store in Camden is a fantastic opportunity to maximise the potential of 8 acres of prime London real estate. The scheme, which will deliver a new Morrisons store, new homes and offices, will also provide circa 1,300 jobs.”
The redevelopment of the 8-acre Morrisons site in Camden will create 570 new homes
Being streetwise – location matters
There is one fundamental element for all these retail offers: location.
Repurposing any asset into residential property involves substantial costs for the developer, including: design, planning permission, demolition, construction, landscaping and compensation, plus contributions to the local authority to balance the impact of the scheme on the local community and infrastructure. The return on investment (ROI) must be enough to justify the project and so repurposing to residential use is only viable if the value of local residential property sits within an ROI sweet spot. And in those locations where residential values don’t stack up, there are always other repurposing options. Two clichés apply here: ‘don’t give up’ and ‘think outside the box’.
John Percy, Head of Places, confirmed, “We are working on projects all over the country, and it is a challenging but gratifying task. Repurposing assets, and therefore saving retail locations from obsolescence, benefits everyone in the area. It’s about working alongside local councils and other landowners, as well as local communities to find a mutually beneficial solution.”
The complex truth
Every scenario creates opportunities, although the complexity of some may leave landowners uninspired and reluctant, especially with such long-term planning required and an immediate outlay of capital.
So many sites have yet to unlock their latent potential by adding alternative uses or converting to housing. If you think your asset may have reached its moment to repurpose, or you’d like advice on the trajectory for your asset and its location, contact our Head of Places, John Percy. Our Places team can assess the feasibility of repurposing any asset, founded on our research and analysis. We have also built tracking software to map all retail assets and local residential rates, meaning we know which locations have already reached the sweet spot for repurposing, and can monitor those which have not.
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