The future for high street retailing When I took on the role of CEO at Revo in 2019, none of us knew that I would be joining the organisation in the midst of an international crisis that would put UK retail under the most enormous strain.
have been involved in retail property throughout my career, both as a lawyer acting for retailers and as an owner. Like everyone who works in the sector, I was aware of the structural changes that were already at play for us. What I did not expect was the sudden and dramatic gear shift we have experienced since March 2020, change on a scale, I would argue, that none of us could have imagined. Retail property, more than any other aspect of commercial real estate, features in the day to day lives of millions of people. For that reason alone, it merits our support and respect. Experiencing the impact of these last weeks and months on the sector has reaffirmed my resolve to be out there supporting everyone involved to the best of my ability. Britain’s high streets form the social and economic heartbeat of our communities. They provide a meeting place for casual social interaction and observation, create a sense of identity that binds people in supportive relationships and as such play an important unrecognised role in our happiness, wellbeing and sense of security. There is 1.2bn sq ft retail and food and beverage space in the UK and of that, 80% is on traditional high streets.1 Covid-19 has placed huge strain on retailers and physical retail owners in our high streets, having endured Government intervention including over three months of closure and a freeze on landlords’ legal recourse, the material costs of new safety measures and the accelerating impact of the pandemic on the growth of e-commerce. As at August 2020, there have been 5,632 retail store closures in the UK, resulting in 42,817 job losses,2 and in the four weeks beginning 5 July, high street footfall was down 47% against previous years, notwithstanding the draw of hospitality having reopened.3 This trend is likely to continue in the medium term in any event, as the significance of online spend is unlikely to decline, as the business rates revaluation date is pushed out, as the UK endures recession and retailers with previously strong high street footprints, shrink their presence; with stalwarts like Marks 72
Cambridge University Land Society 2020
& Spencer and John Lewis shutting shops in a way, previously unimagined. There are knock on consequences for employment, largely women and local economies. Is the UK at risk of creating ghost towns with an evaporating physical shopping experience? The estimated 25% oversupply of physical retail space in the UK ahead of Covid-19, caused by increasing business rates, declining footfall, wage increases and e commerce, has been exacerbated by the pandemic. There is no doubt, these are as challenging times as have likely ever faced the retail and retail ownership market and no silver bullet exists to effect the scale of change needed. That said, crises present opportunities and there is every reason for optimism in the long term. Government policy is now more supportive of high street regeneration as the creation of both the Towns Fund and the High Street Taskforce demonstrate, further evidenced by the Government’s fundamental review of business rates and its planning reform consultation, for which Revo are campaigning vigorously. Retail and retail space ownership is a market that, with a supportive policy environment, has the energy and imagination to adapt and continue to attract strong occupier brands who will draw people towards the local social and economic benefits offered by physical retail in our high streets. These are some of the key factors which will play their part in determining the future of physical retail in the UK:
Evolution of space The purpose of space is to serve a need and as that need changes, the use of space must change also. Consumers have been liberated by online purchasing and the market has to provide a meaningful reason for visiting the high street. Alternatives such as ‘pop ups’ and local markets demonstrate the immediate adaptations to the use of retail space providing occupiers with the freedom of short-term exposure and consumers with the variety of ‘here and now’ shopping. For the longer term, examples
Vivienne King CEO Revo
are already in place showing how retail space can be creatively reimagined to serve community needs with a mix of workspace, leisure, exhibition, hospitality, media and home – as well as retail. With creative thinking, high street retail will encompass this exciting and eclectic variety of goods and services and as such will endure and remain a key part of our everyday lives. The real estate industry recognizes the role of the built environment on social value and recognizes the need for places to be designed with the customer in mind. Different geographies have different needs and the use of space must reflect those needs if they are to be effective; there is no cookie cutter answer to successful locations and consultation with the users of place in those locations is key to establishing what will be useful, valued and successful. It’s in this context that this year Revo published a new Social Value Framework to guide property owners as to how to track and measure their success addressing local needs.
Level playing field for online and physical retail The uneven playing field between online and physical retail space has been exacerbated through lockdown with e commerce open and gaining ground and bricks and mortar closed for all but essential goods. With the materially lower costs of occupation experienced by pure online, specifically with the exponential impact of business rates on physical retail, equalisation between online and offline is long overdue.