Since lockdown and the acceptance that there really is a post-Covid new norm, there’s been a lot of speculation about what might happen to the retail and commercial sectors and which way they might turn.
Recent news that caught my attention is that one the UK’s retail giants – John Lewis – has announced plans to target 40% of its total income from non-retail activities. Where is the bulk of this revenue to come from? From property development, with 2 planning applications in the Greater London region expected early next year.
I didn’t necessarily think it would be the big hitters making such announcements first, but this comes as little surprise. High streets in particular have been beleaguered for years, but with the huge growth in online retail over the last decade, retail parks and shopping centres have also been feeling the pinch.
Add to this the post-Covid exodus of office space (which I believe is here to stay to one extent or another) and there are a lot of commercial and retail enterprises in very tight spots…but sitting on huge swathes of real estate.
Of course, retail to resi conversions won’t work in many cases as the buildings are not suited to conversion, but the land upon which they sit has enormous potential. Much of it is under-utilised and low-rise – ideal for high-rise accommodation with retail provision underneath.
This is a potential godsend for the likes of John Lewis. Establishing a property portfolio compliments their home and retail services, ranging from furnishings through insurance to groceries in the form of Waitrose. Self-sufficient, town centre Republics of John Lewis cropping up across the land!
Will other major retailers be thinking along similar lines? Several are diverse enough to do so, and with the trend in the PSR sector moving towards experience-led, convenient community living, the model could be beautiful for landlords and tenants alike.
As far as the smaller retailers go, I suspect there will be a good number of sites coming to market over the next year that lend themselves to repurposing. Well-managed, it could lead to a healthy increase in city centre housing provision, although the cynic in me doubts it will alleviate the affordability crisis much as it will likely be the higher end of the rental market that will benefit.
It’s interesting that the future looks brighter for housing provision where it’s currently needed less. Post Covid, the markets are being driven by the desire for out-of-town properties, bigger properties that facilitate working from more, more open spaces and so on. Demand has shifted away from the urban centres, and at Hilltop we’ve certainly seen stronger need for development finance from SME developers in these areas.
The likely positive impact the repurposing of retail and commercial space will have on housing provision can only be a good thing. It will be fascinating to see how things pan out and to observe what effect it has on the shifting demographics of the country over the mid to long-term.