How the real estate sector will be vital in bringing back the spark of life to our city centres.
Grabbing a coffee, shoe repairs, topping up on groceries, picking up a prescription – all things that conveniently fill our lunch hours during a working day. But what is ‘convenient’ has changed.
Previously all these tasks were discharged at shops within a few blocks of our city centre work places. The work from home era has seen this trade migrate to shops in the suburbs and commuter towns.
As retail reflects on the last 18 months it is clear that there has been positivity for local businesses. Retail parks too have been resilient. The biggest casualties then have been in city centres. Our city streets remain eerily quiet – even after all this time.
In real estate no sector is an island. Retail, leisure, hospitality and offices stand together as an ecosystem that once disrupted cannot function as successfully as before. This can be seen more clearly than ever as we continue through the Covid recovery phase. Retail works better when restaurants, pubs and cafes are at full strength and vice versa. One real estate use complements another. And for any of these sectors to operate successfully they need footfall. That means busy city centres. That, in turn, requires the return of our workforces to their offices. The connections are inescapable.
As with retail, the revival of our city centres is crucial for the real estate sector. But how will the real estate sector respond and can it help nurture the green shoots that will see the property ecosystem find a new equilibrium?
For the moment investors have shifted focus from retail to warehousing and life sciences and away from offices to student accommodation. Existing portfolios however, remain heavily weighted with retail, leisure and hospitality properties and so their importance is undiminished.
In the office world, since construction workers were allowed to return to site following the first lockdown, our cities have seen the continued emergence of fresh structures of glass and steel. Thousands of square feet of new office accommodation has been added to city centres across the country. All will be awaiting their office worker occupants.
These new offices often come with enticements such as electric car charging stations, basement gyms, cycle ramps and stores, even roof top running tracks. Investor and developer confidence in the office sector remains firm – but transaction volumes are significantly down on 2019 comparisons.
Predictions that our days in offices are at an end may be wholly of the moment. How will things look in six months or twelve months as the nation comes to terms with Covid? Reports from Israel, which is a global test case following its trail blazing vaccine programme, suggest that office life can surge back to normality rather quickly once restrictions are lifted.
There has been a high level of activity in the restaurant sector. With the established high street names in retreat, landlords are fighting back by seeking ambitious new tenants free of CVA baggage. Look out for a fresh mix of restaurant brands and concepts on our city streets.
Hospitality will be experiencing a summer like no other. With international tourism unlikely to return to normal for some time yet, there is a chance to impress the domestic market as staycation is the only vacation for many. Live events – a boon for accommodation providers - are also back on the agenda. The next question will be around conferences and business travel.
In retail we are continuing to see robust interest from investors. Local investors are seeking bargains and opportunities including at commercial auctions (where there has been a clear upswing in activity). International investors are seeking out properties occupied by Covid resilient occupiers.
So what does all of this mean for real estate going forward?
Stakeholders must join in planning for a sustainable, balanced future for towns and cities. That will include commercial property owners, retailers and local authorities (particularly their planning departments). City centres could be re-thought to become greener, cleaner and more pedestrianized – all helping reach those environmental targets.
This can become about seizing the opportunity presented by the pandemic. For many cities that will mean bringing back people on a permanent basis – creating vibrancy from a resident population rather than relying on visiting workers and tourists. Glasgow, for example, has become one of the slowest cities to recover post pandemic principally due to the lack of a substantial population within its central areas.
All those pre-pandemic plans to ‘repurpose retail’ are still on the agenda. Empty department stores converted to new uses. The importance of logistics in a world of online shopping will also drive alternative uses as more centrally located delivery depots are required to fulfil online orders.
This can become about seizing the opportunity presented by the pandemic.
Tactics employed by retailers will inevitably play a part too. A multi-channel approach that sees online purchases fulfilled in-store by way of click and collect not only saves on last-mile fulfilment costs and retains relevance for bricks and mortar locations but brings the additional benefit that customers make additional purchases while in store.
Initiatives will be endless and many of the key changes may already be well underway as a result of pre-pandemic planning. A sustainable city centre ecosystem can be re-established but it will require all stakeholders and sectors to work in partnership.
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This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.