Following the recent announcements that major department stores in both the U.K. and the US have buckled under the pressure of a difficult trading year, many questions are being raised about what will happen to these spacious buildings.
It’s a valid question. These units are typically several stories high and take up a large square footage. In reality, the only retailer who would be interested in taking over an empty retail store would be another similar sized retailer. But any competitors are either facing similar troubles or are likely to remain extremely cautious about expanding their real estate portfolio with such an uncertain future ahead. So what is likely to happen to these spacious units and are they likely to be utilized, or will the high street look end up looking even more like a ghost town than it did before?
Some retailers are continuing to perform strongly and so could consider occupying empty properties temporarily. This may enable them to assess the viability of business in a different location or continue to trade whilst renovations are taking place to their existing property. Recently, it was revealed that retail tycoon Mike Ashley was considering moving some of his brands, including House of Fraser, Sports Direct and Flannels into empty Debenhams stores. In an article on This is Money, it was explained this would involve a process called ‘Vacant Possession’ on properties which are currently running on extremely short-term 12 month leases. If Mr. Ashley did take on these properties for his new brands though, he would have to negotiate terms with the landlords to keep these stores operating on an ongoing basis.
Real estate specialists Savills released a report in 2019 which explained why leisure operators were the perfect fit for empty retail units. The report said, ‘With experience becoming increasingly important to consumers, and consumer spend on experiential concepts continuing to grow, leisure has become a great option for repurposing underutilized retail space with operators of gyms, bowling alleys and adventure golf all now bringing leisure based experiences to retail environments up and down the UK.” The report cites examples of the repurposing of a previous House of Fraser unit at Highcross Shopping Center into Treetops Golf and a former BHS store on Oxford Street into a mini golf and bar operator. Clearly there are many opportunities for empty retail units to be transformed into leisure offerings which would help to bring much needed traffic back to the high street once the dangers of COVID-19 have passed.
Shared Office Space
Many organizations have had to drastically rethink their real estate requirements as the vast majority of their employees become accustomed to working from home. The longer the situation goes on, the less necessary a physical office becomes, at least in its previous capacity. One option may be that several businesses look to club together and take over an empty department store. Each business could have a particular level but may share resources such as break out rooms, meeting rooms and parking. According to a recent article in Facilities Management Journal, ‘long-lease commercial property still dominate the UK market, with flex space like coworking offices or serviced offices accounting for just six per cent of the total market share – but this is set to change as the flexible trend grows’. The story also includes further insight from office space provider The Instant Group which reveals that Post-Covid, more companies will be unwilling to take on the expense of a long-term lease, or the level of risk that comes with it. This is where these more flexible, shared office venues may come into play.
As testing, tracing and vaccinating rolls out to the masses, department stores could make an excellent venue for a temporary COVID-19 testing station, as a venue for administering vaccines or for offering out-patient services in order to free up the main hospital for COVID-related treatment. Their centralized location and spacious buildings would work well not only for accessibility but for maintaining safe social distancing too. In November, it was reported that one NHS trust in Warrington was planning to move some of its services into empty shop units. A spokesperson for the move said, ‘The proposed expansion and/or relocation of these services delivered in a non-hospital setting limits the risk of hospital acquired infection, critical in the Covid-era. It is also hoped the relocation of services will increase footfall in the Shopping City, with 200 patients per week using Halton’s ophthalmic services alone. This could help breathe new life into the run-down shopping center.”
There has been talk for some time that empty retail units could be utilized for housing and this becomes even more relevant when you consider the size of a department store and the potential for multi-occupancy housing units. That said, the process of converting a commercial unit to a residential one is not always straightforward, as the quality and condition of retail units varies quite considerably. Developers are also required to apply for a change of use for the building which has historically been difficult to obtain due to ‘red tape’. Earlier this year in the U.K., Prime Minister Boris Johnson implemented radical reforms to the 70 year-old planning system, allowing for vacant buildings in town centers to be converted into housing more rapidly.