For several years, there has been a very evident and well publicised demise of local high streets as they struggle to compete with the ease and efficiency of online shopping. This has led to what is commonly termed the ‘death of the high street’. According to research from the Local Data Company and PWC, 11,120 chain store outlets shut between January and August this year. This is a worrying figure, not only for the retail sector but also the wider economy.
Despite this alarming statistic, I would argue that rather than dying, high streets are transitioning and Real Estate has an integral role in bringing them back to life. To demonstrate how this is and will continue to be done, let’s look at three key ways the property sector is adapting in order to repurpose the high street and bring footfall back to high streets.
1. Overhaul of the planning use class system
The government enforced a new planning Use Class system from the 1st September which allows greater flexibility for changes of use to support high streets to adapt and diversify. The enforcement of this was no doubt accelerated due to the recent lockdowns and rapid closure of high street stores. Retail falls under Class E in the new system. This basically means that retail is now in the same Use Class as nurseries, fitness, medical services and offices amongst many others.
How will this revive the high street?
Changes within a Use Class are not considered development so therefore no planning permission is required.
So now it is possible to convert a retail unit into an office or gym without having to go through a lengthily planning application. Previously this would have been a formal application to the local authority for a change of use and chances are it would have been refused. This will mean that dormant retail units on high streets will be utilised by property developers who will see an opportunity to convert these to better demanded uses, such as offices, which in turn will bring some life and foot flow to the high street.
2. Turnover rents
We are beginning to see a shift in the market towards an acceptance from property landlords for a concept called turnover rents. Simply, a turnover rent is a rent that is calculated as a percentage of annual turnover. For example, the retail tenants rent could be 10% of their annual turnover. This is very different to the traditional format where tenants simply paid a fixed rent each year, regardless of their performance. This has, in part, been driven by the recent lock downs and the need for landlords to devise a renal strategy that ensures the survival of their tenants.
How will this revive the high street?
This will allow retailers to occupy space safe in the knowledge that they won’t have a large, fixed rental burden. Instead the rent will be related to their sales. This will increase the accessibility and affordability for retailers looking to take occupation of units on high streets. It will also give new retailers an opportunity to prove their concept. Lease terms will be more flexible i.e. 12 monthly contracts in which retailers are given the opportunity to take occupation and prove performance over the period on a turnover rent. This should drive take up of vacant retail units.
3. Permitted development rights – retail to residential
Permitted Development Rights (PDR) have been in place for a while for office buildings and this has seen an abundance of new residential come to the market. PDR is a form of implied consent allowing conversion without planning permission being necessary. These rights are soon to be extended to retail units meaning that they can be converted to residential without the need for a planning approval process.
How will this revive the high street?
We will see the return of residential on the high street as property developers look to utilise this relaxing of the planning laws. Developers will be able to convert retail units to residential without having to go through the stringent planning process, meaning that vacant retail units will more easily be able to be converted. This will see a push towards more residential on the high street which will in turn bring foot flow to the high street.
The above have already seen a very positive shift in the real estate landscape towards repositioning the high street and utilising the built form that is currently there. These measures, among others, should see some life brought back to the high street and ,whilst the high street might look very different, the streets should be busy once again.
By Tomas Jansons, development manager, Jansons
