What can be done with large number of empty units on high street?
Recent collapses of big high street names such as Arcadia and Debenhams have placed focus on problem faced by landlords. What can they do with the large number of empty units on high street? Online giants that bought the Debenhams, Topshop, Dorothy Perkins and Topman decided not to take any leases on for the existing shops. What that means is that 15m square feet of space will be coming to the market in England and Wales. For illustration purposes, the size of this empty batch equals in size to around 200 full size football pitches.
The struggle of retail and food establishments to make bricks-and-mortar- pay combined with pandemic, falling appeal of High street and migration of shoppers online has meant that vacancy rates in towns were already high.
Some of these empty sites will be taken over by variety of retailers or repurposed. Many are likely to stay empty with no viable alternative use unless there is an intervention by local or central government. Landlords, who are a key stakeholder on our high streets would prefer the option of re-letting and are scrambling to align new batch of tenants. Debenhams stores in the shopping centres owned by Hammerson have been taken over by Next, although this takeover was only in Reading and Croydon. In the out-of-town retail parks these empty units were quite quickly leased out to new tenants. Potential new tenants for some of the other empty Debenhams units include B&M and Home Bargains discount stores as well as fashion brands such as Zara and JD Sports. Debenhams units are harder to fill compared to those of Arcadia and it simply comes down to size.
In the neighbouring Coventry shopping centre was recently sold by an auction house for £4.9m, in 2013 when the Debenhams was an anchor tenant it was valued at £37m. The buyer has opted to keep the shopping centre as ongoing concern. However, retail will not be able to fill the vacant units, there are simply too many and the demand is not there. Dining chains, which picked up hundreds of empty sites 10 years have also been knocked back and all of them are in the process of cutting down their estates. The high street has been declining for years now and this crisis has just accelerated it. So, in the absence of demand for empty space, landlords are looking at other options, which has been also encouraged by government. One of the possible solutions are experimental leisure companies which are betting on pent-up demand for social activities once the pandemic is over. In south London, former 80,000 sq ft Debenhams store has been taken over by Gravity, the trampoline company in a £4m joint venture with the landlord and an investment company. It will feature go-karting area, bowling, pool, darts and crazy golf. Other similar groups are looking to snap up sites vacated on central London, many becoming mixed use with retail, leisure and offices. The landlords have been offering reduced rents at almost 30% from previous pandemic levels and even offering to pay for some of the upfront development costs. Even with leisure companies looking to fill the empty spaces there will be still to many left to fill. The government is considering rolling back rules on commercial to residential conversions which could see a lot empty shops reborn as flats. This is a risky move that according to opposition could see high streets filled up with low-quality housing. There have been some arguments pointing to re-imagining high streets entirely. One example is in Stockton-on-Tees where the local council is exploring plans to knock down the shopping centre that dominates the high street and replace it with a riverside park, featuring also a land bridge and large lawn for outdoor events, the plans have been called as the most radical to date and an inspiration for other town centres. Other councils could follow this initiative rather than looking at repurposing empty units.