Unlocking retail

The world of retail continues to change – there’s been a dip in consumer confidence and a shift to spending money on experiences as opposed to physical goods. From reading the UK press you’d assume that all retail locations are dead across the board from shopping centres, retail parks, prime shops and department stores. However this is far from being the case, although footfall is down, spending is holding firm. Rather than writing off retail, a fresh approach with the blinkers off, needs to be taken. One that considers retail on a local level, assessing and understanding levels of demand and opening up space to more than traditional retail use.

Conversion to residential isn’t the ‘silver bullet’. There are a multitude of options available to landlords and many of these are unlocked by understanding that it isn’t a simple case of finding a new occupier for a vacant store. Rightsizing is a crucial element to the process – are stores too large for their occupants? Can a department store be broken up and converted to other uses? Repurposing retail requires a long term vision for the asset. A keen understanding of current demand and future micro and macros factors that may affect the unit’s area is crucial. The involvement of a key stakeholder, such as the local council, will improve viability.

A balance between demand and value needs to be met in order to get the most from an asset. As every community is different, this could involve a range of solutions in order to create the ideal space. From a long term perspective, educational use, retirement living and hotels are all attractive additions and hold the strongest values. A department store may well be able to keep its presence on the high street, however the physical asset might need significant investment in order to adapt. By looking at the local demand for office, residential or leisure space the store can be rightsized to provide a set number of residential units or co-working space for instance.

Creating a sense of place through providing space to work and live drives demand. It also creates assets that investors want – particularly in the alternative sphere. The right space in the right configuration is naturally a more attractive option.

At Savills we use a research based method and work with clients on their existing portfolios. There is growing and significant money looking to buy retail assets for redevelopment or repurposing purposes, but there are also investors looking for alternative sector opportunities for their assets. Increasingly there has been a move into land and the repurposing opportunities in order to create capital market product. We have also been working with retailers on their land holdings and store portfolio in order to right size and create value. Repurposing is now no longer just about high street shopping centres but spans the spectrum of real estate and Savills with its national network of offices and specialisms is well placed to advise.