Decline of department stores means more space for mixed use
Simone Protheroe, an associate in our construction team, looks at how the changing face of the high street could be good news for increasingly popular mixed use developments, and what this will mean for the communities surrounding them.
The vibrancy of the high street has declined over a number of years, with the retail sector battling the impact of the 2008 crash, followed by massive growth in online shopping and then a global pandemic. In addition, consumers have sought more from their “retail experience” and the sector has not always been able to keep up with demand or anticipate what consumers are seeking.
Popular brands have increasingly directed their focus on building strong connections with consumers via their own websites, social media platforms, and other online-only marketplaces. This shift played a significant role in the closure of long-serving department stores which have been a staple of the high street for over one hundred years including BHS, House of Fraser and Debenhams.
The UK has seen an 83% loss in department store space with 388 stores being shut since 2016. The impact of COVID-19 also played its part in the loss of these large high street stores although it could be argued that the pandemic merely brought forward the inevitable. Debenhams had been placed into administration before the pandemic lockdowns.
These vacant units are large, and many are currently standing empty. Furthermore, many of the units are aging buildings meaning disrepair is likely and, in addition, they are unlikely to meet growing requirements for sustainability and energy efficiency. But could this be the answer to the growing demand for mixed-use development sites?
Retail chains or individual retailers are unlikely to want such large retail spaces anymore, but department stores are often situated in areas not particularly suited to becoming purely residential units. In addition, the pandemic has changed the shape of the high street with many smaller businesses thriving leaving a significant number of unlet, large units with multiple floors.
With some forward-thinking and creativity in the current real estate and construction market the re-development of the nation’s empty department stores could be a positive move. Some retailers, such as John Lewis, are already considering adding residential units to existing stores that are still trading.
Mixed-use developments can be an ideal solution to seeing these (often historic) buildings re-occupied and transformed from their current unappealing state.
Over the years, mixed-use developments evolved from a traditional residential building with retail on the ground floor to a more complex retail-led development with attached residential or leisure facilities. Using department stores as mixed-use sites opens up a world of opportunity for innovative solutions. An example is the former BHS store on Edinburgh’s Princes Street, which is now part hotel, part office space, part leisure, with a bowling alley in the basement.
A rejuvenated use of mixed-use development is becoming increasingly popular as a solution to the consumer’s multi-faceted requirements for modern spaces. These significant and extensive spaces have the potential to become important and functional sites.
Mixed-use developments have become a fundamental feature of planning policy, due to the benefits they provide not only to high streets in big cities but also to urban centres. By adopting mixed-use developments, the local community benefits from local economic improvements, social connectivity, and sustainability.
Building out and managing mixed use buildings is not without challenges. A development with a good mix of tenants will require agile and proactive management to address the varied needs of the occupants and to avoid disputes which may arise e.g. in relation to noise, some of which could be anticipated and built into the design. Due consideration should also be given to the multiple ways for structuring the legal interests in a new mixed-use development, because once a legal structure is selected it can be very difficult to change. Developers, funders, and contractors will need to consider a number of issues before embarking on such projects to ensure that the result will tempt unit-occupiers including, but not limited, to;
- Listed building consents
- Planning permissions
- Insurance obligations
- Party Wall Agreements
- Design responsibility
- The use of a joint venture
- Appropriate forms of building contract and at the potential for more than one contractor
- Conditions surveys and risk allocation
- Agreements for lease for a multitude of leaseholders
- Forward funding requirements.
Early examination and analysis of the diverse legal and regulatory prerequisites of mixed-use developments is the key to their success.
Clarke Willmott’s nationwide experts can assist funders, developers, tenants and contractors in facilitating these exciting re-fit projects covering everything from acquisitions, funding and commercial leases to re-fit building contracts, warranty packages and drafting occupational leases, so please get in touch with one of our team if we can assist.