Repurpose

Chapter one

The loss of certain high street giants before the pandemic left many landlords struggling to find new occupiers for large anchor stores. The pandemic considerably intensified the challenge.

During the lockdowns there was a lack of demand for new units as retailers abandoned plans to open new stores. Further department store closures, including branches of John Lewis, led to an increased supply of large units.

The concept of repurposing empty retail spaces has been around for some time. The transformation of an empty department store in Manchester into a shared work and retail space in the 1980s kick-started the regeneration of its Northern Quarter. Even before the pandemic hit and lockdown forced people’s shopping habits to change forever, the retail sector had been experiencing a period of uncertainty as a result of Brexit and the resultant political instability. Furthermore, oversized store portfolios have been an issue for years, in the face of the rise of internet shopping and changing consumer habits.

The purported death of our high street has been well publicised and predicted for some time. Commentators, including Mary Portas and author Mark Pilkington, have been incredibly passionate and vocal about what needs to be done. However, while the sector has been looking for solutions, it has been reluctant to repurpose the vacant space with something more innovative and sustainable. In the meantime, shop fronts have stood empty while we have collectively held our breath and hoped for the best.

Repurposing sits at the very core of how we reinvent our high streets to create the places we need in a new, post-pandemic era. The era of siloed retail spaces is over. We must adapt them to encompass not only retail but leisure, healthcare, wellbeing, residential and flexible workspaces.

Has the pandemic finally presented us with an incentive to make repurposing work?

David Paxton, Real Estate Partner and Head of Repurposing, Royds Withy King certainly thinks so, “We need to redefine exactly what it is we think our high streets are. We tend to see them as retail spaces; but historically they were centres of commerce with people living, socialising and working in them. The pandemic has accelerated the trend for home working and the rise of flexible office hubs, one of the more obvious and well publicised examples of repurposing empty units on the high street. This will drive up footfall, which will in turn lead to a demand for other services, inject money into local businesses and lead to a renaissance. Our high streets will look more like their Continental and North American counterparts supporting sustainable communities”.

The last year has seen headlines around John Lewis’s ambitions to convert a significant part of its Oxford Street flagship store into offices, an Edinburgh BHS being converted into a hotel, with co-working, retail and leisure purposes, and, more recently, a proposal to repurpose ex-department stores into university space and student accommodation.

In the US, shopping malls across the country are currently being repurposed into hospitals and university campuses. On paper, the appeal for university campuses is obvious. Located in the heart of our towns and cities, former department stores with high ceilings offer a lot of space and ventilation to accommodate both lecture theatres and laboratory space. Students will be seen hard at work during the day and bring much needed footfall to the high street economy. There now seems to be appetite for this in the UK, as, in March 2021, Gloucestershire University bought the town’s old Debenhams store to use as lecture halls with students expected to begin studying there by September 2023. The new campus will be a modern centre for teaching, learning and community partnerships, and will play a vital role in the city’s reinvention.

Recent changes to the Use Classes Order 1987 created a new class E, now the relevant class for most retail units. In the majority of cases, Class E allows operators to switch between a diverse list of uses - retail, food and drink, financial services, gyms, health services, crèches and nurseries and offices - without needing additional planning permission. This gives our high streets much more flexibility to change and adapt to demand trends, giving our towns a longer term advantage. However, local authorities can still exert control via planning conditions where physical changes are required.

Geraint Jones, Director in Savills’ Planning team comments, “Local authority planning teams must show flexibility, balancing the requirements of historic retail policies with the need to ensure that our high streets offer a cultural and land use mix that encourages people to return, responding to the increase in online shopping and remote working. There is no doubt that it is important to preserve some sense of townscape, but we need planning authorities to be positive and decisive when opportunities to deliver necessary change are presented by developers.  If we are too cautious high streets will continue to struggle for decades ahead”.

David adds, “We need to give people the flexibility to repurpose empty units into other, more desirable ventures. Repurposing retail spaces makes for a more thriving high street. What would be better: an empty retail unit or a new pop-up, restaurant, bar or gym? We need to think of our high streets as environments that are no longer just about shopping, but more about building mixed-use, sustainable communities. However, to be successful, repurposing old retail space will necessitate a new, closer and more flexible relationship between landlord and tenant”.

The last year has seen headlines around John Lewis’s ambitions to convert a significant part of its Oxford Street flagship store into offices, an Edinburgh BHS being converted into a hotel, with co-working, retail and leisure purposes, and, more recently, a proposal to repurpose ex-department stores into university space and student accommodation.

In the US, shopping malls across the country are currently being repurposed into hospitals and university campuses. On paper, the appeal for university campuses is obvious. Located in the heart of our towns and cities, former department stores with high ceilings offer a lot of space and ventilation to accommodate both lecture theatres and laboratory space. Students will be seen hard at work during the day and bring much needed footfall to the high street economy. There now seems to be appetite for this in the UK, as, in March 2021, Gloucestershire University bought the town’s old Debenhams store to use as lecture halls with students expected to begin studying there by September 2023. The new campus will be a modern centre for teaching, learning and community partnerships, and will play a vital role in the city’s reinvention.

Recent changes to the Use Classes Order 1987 created a new class E, now the relevant class for most retail units. In the majority of cases, Class E allows operators to switch between a diverse list of uses - retail, food and drink, financial services, gyms, health services, crèches and nurseries and offices - without needing additional planning permission. This gives our high streets much more flexibility to change and adapt to demand trends, giving our towns a longer term advantage. However, local authorities can still exert control via planning conditions where physical changes are required.

Geraint Jones, Director in Savills’ Planning team comments, “Local authority planning teams must show flexibility, balancing the requirements of historic retail policies with the need to ensure that our high streets offer a cultural and land use mix that encourages people to return, responding to the increase in online shopping and remote working. There is no doubt that it is important to preserve some sense of townscape, but we need planning authorities to be positive and decisive when opportunities to deliver necessary change are presented by developers.  If we are too cautious high streets will continue to struggle for decades ahead”.

David adds, “We need to give people the flexibility to repurpose empty units into other, more desirable ventures. Repurposing retail spaces makes for a more thriving high street. What would be better: an empty retail unit or a new pop-up, restaurant, bar or gym? We need to think of our high streets as environments that are no longer just about shopping, but more about building mixed-use, sustainable communities. However, to be successful, repurposing old retail space will necessitate a new, closer and more flexible relationship between landlord and tenant”.

The model for a new relationship between landlords and tenants?

One landlord who has worked closely with their tenants during the pandemic has been The Cadogan Estates in Kensington and Chelsea. With a 300-year family history, the ethos of the Estate is to enhance the neighbourhood’s unique character whilst preserving the historic integrity of one of London’s finest boroughs.

We spoke to Steven Medway, Place Manager there, who had the following to say, “Supporting our tenants through the long-term impact of the pandemic was vital to protect what makes Kensington and Chelsea such a special destination. We have always had a close relationship with our tenants. During the pandemic this was enhanced with regular communications and business breakfasts every quarter. We set up a £25m Business Community Fund to help businesses, to include emergency rent support measures and a commitment to fund rent relief by switching over thirty leisure and hospitality occupiers onto turnover-based leases. We also supported a number of NHS initiatives, including funding to ensure the provision of 32,000 medical gowns to local hospitals through The Fashion School”.

One tenant that that was able to thrive during the pandemic thanks to the support from the Estate was high-end Italian restaurant Manicomio on Duke of York Square. The business streamlined their menu, adapted their restaurant layout, closed their café, expanded their terrace and provided a delivery service.

Steven adds, Throughout the pandemic, Cadogan was willing to sacrifice short-term financial returns to meet the longer-term objectives of the Estate and its occupiers. The continued repurposing of Pavilion Road to create a traditional High Street, with services such as a dry cleaners, butcher, baker, wine shop and general store, did incredibly well during the pandemic. We supported them with e-cargo bike deliveries to get their produce to the local community”.

The result? A convincing case for a new, closer and more flexible relationship between landlord and tenant.

Could healthcare play a key role in the reinvention of the High Street?

This year, a report published by the Social Market Foundation suggested that empty shops and offices could be used to create high street ‘healthcare hubs’ offering GP surgeries, health and social care services, and gyms. In summer, department store chain Beales struck a four-year licencing agreement with the NHS to build a ‘health village’ on the top floor of its Poole store where it will house dermatology, orthopaedics, ophthalmology and breast cancer screening departments, as well as wellbeing and counselling rooms for those suffering from long Covid.

Paul Daniels, Real Estate and Social Care Partner, Royds Withy King, “In the aftermath of the pandemic we are likely to see permanent changes to our high streets. The challenge is to attract new occupiers and visitors so the high street remains relevant. We think health and social care should be a key aspect of this. Retirement villages have traditionally been in rural or suburban areas but we are already seeing empty space being converted into specialist housing, ‘health hubs’ and care homes. Developers like the Guild Living have been acquiring vacant retail units to build accommodation for the over-65s who want to be closer to high streets for eating out, shopping and cultural pursuits”.

Other developers are certainly following this trend: Retirement Villages Group plan to build 5,000 homes across 40 urban sites over the next 10 years; and Legal & General has publicly stated the ambition to build 3,000 retirement homes in a £2bn project, including on the sites of former Homebase stores in Surrey and Bath.

Geraint adds, “Many people in their retirement are choosing to downsize in terms of space, but balancing this with moves to locations that offer a different way of living.  Housing within our towns and cities can respond to this, enabling independent living through good accessibility to services, facilities and leisure uses.  Increasing the population living centrally will help to breathe life into the high street through additional footfall and disposable income, supporting its long term sustainability”. 

Could healthcare play a key role in the reinvention of the High Street?

This year, a report published by the Social Market Foundation suggested that empty shops and offices could be used to create high street ‘healthcare hubs’ offering GP surgeries, health and social care services, and gyms. In summer, department store chain Beales struck a four-year licencing agreement with the NHS to build a ‘health village’ on the top floor of its Poole store where it will house dermatology, orthopaedics, ophthalmology and breast cancer screening departments, as well as wellbeing and counselling rooms for those suffering from long Covid.

Paul Daniels, Real Estate and Social Care Partner, Royds Withy King, “In the aftermath of the pandemic we are likely to see permanent changes to our high streets. The challenge is to attract new occupiers and visitors so the high street remains relevant. We think health and social care should be a key aspect of this. Retirement villages have traditionally been in rural or suburban areas but we are already seeing empty space being converted into specialist housing, ‘health hubs’ and care homes. Developers like the Guild Living have been acquiring vacant retail units to build accommodation for the over-65s who want to be closer to high streets for eating out, shopping and cultural pursuits”.

Other developers are certainly following this trend: Retirement Villages Group plan to build 5,000 homes across 40 urban sites over the next 10 years; and Legal & General has publicly stated the ambition to build 3,000 retirement homes in a £2bn project, including on the sites of former Homebase stores in Surrey and Bath.

Geraint adds, “Many people in their retirement are choosing to downsize in terms of space, but balancing this with moves to locations that offer a different way of living.  Housing within our towns and cities can respond to this, enabling independent living through good accessibility to services, facilities and leisure uses.  Increasing the population living centrally will help to breathe life into the high street through additional footfall and disposable income, supporting its long term sustainability”.