Updated: Jan 18
We’ve been keeping an ear to the ground on discussions surrounding the future of the high street, retail and commercial space. Retail seems relatively healthy in regional centres – with orderly queues still forming outside major chains. But what about smaller towns?
And are people really spending, or is it just a good way for them to get out of the house and socialise; window shopping, while their true purchasing loyalties lie with online platforms. Will retail dry up with the end of furlough? And longer-term, what are the impacts of negative press surrounding the tremendous chemical pollution and waste figures associated with fast fashion? And will the workforce ever truly return to their desks when working from home, at least part time, seems to be so popular?
As investors, this is the best time to put all those questions to work, and make sure that it’s your property, or those you’re thinking of buying that holds the answers. Skate to where the puck is going to be, so they say.
So here’s where we think the puck is headed for commercial and High Street space, at least for the next few years:
Fabrication & Manufacturing:
No, not Tesla factories or re-patriating the British steel industry (sorry). We mean space for all those people who have realised there is a revenue-generating future for them on Etsy. We’re talking about workshops and studios for the upcyclers, jewellry makers, and novelty cupcake bakers once they’ve grown out of their spare bedroom or garden shed. Busying High Streets with people producing, rather than consuming would be quite a sight.
As commercial tenants we predict these organisations to be resilient, developing a loyal client base in their post-Covid community who are determined to shop local, and fill their Instagrammed lives with exclusive “limited editions”. Furthermore, we expect the UK Government will really be ramping up investment in the UK export offer after Brexit – supporting the growth of start-ups and SMMEs with gusto.
“Boutique” Storage & Distribution:
Quite a straightforward punt here. If the future is online, distribution supply chains need to respond. Sure, there are plenty of landowners and investors already building sheds by the motorway, but that’s no reason for high street building owners to seek a slice of the pie. Access is the biggest problem here, tricky - but not impossible.
When was the last time you paid for an online event? Eventually, even the most generous digital event organiser will have to pack up and go home if they can’t start charging a sustainably priced “admission”. But we think global contribution to events are here to stay – its been spectacular to have world-class keynotes delivered from home offices.
So we think the next step is a hybrid space, designed to host these international contributors, ticketed, and capable of facilitating “the new novel” socially distanced post-seminar networking and canapes for exclusive and limited numbers.
There’s also a huge void to be filled for expos and exhibitions where revenue is derived from exhibitors.
Experiential Food & Beverage:
This is literally linked with basic human needs (like housing). Going out for a coffee or a beer is a simple, relatively low cost and immediate “feel good” act that will always have a market no matter how financially constrained consumers might become. But we can’t ignore the need to rethink the model – not when pubs have been suffering for years, and many outlets have been forced to operate at a lower occupancy (which presumably will have dramatic effects on profitability)
We think high street retail properties, as opposed to other commercial spaces, have a particularly strong opportunity here, with deep plans that are well-suited to back-of-house functions and enormous scope for appropriating outdoor space in front of the building. For high streets that suffer from narrow pavements and vehicle priorities, now might be a good time for landlords to consider whether road closures at certain times of day would be helpful
With flight-shaming already becoming a “thing” before Covid, we’re pretty pessimistic that the city-break to New York or Milan is coming back anytime soon. HOWEVER… this doesn’t mean people aren’t still dreaming of a New York or Milan experience… the question is, what is the UK hospitality industry going to do to scratch that itch, for a fraction of the cost (or not)… and which commercial landlords are going to open their doors to deliver the space.
To support this we also think property owners would be well-served to understand the tourist opportunities that exist in the locale. Take advantage of civic societies, Chambers of Commerce, and local cultural outlets such as galleries, venues and museums to help promote tourism to towns where you hold property.
Contentious, we know. Not all upper stories of retail/commercial buildings are well suited to become residential. In fact, with narrow frontage, deep plans and tricky servicing there is the potential for conversion to resi for many historic High Street properties to be quite complicated. We’d even go so far as to suggest that this type of development would take many more years of financial investment than most modern investments strategies such as flipping can sustain. This is why we’ve included Storage & Distribution as an alternative – the type of slow, low, but secure investment that we’d like to think Warren Buffett would approve of.
But! Top-floors are much easier to resolve as converted residential space, with opportunities for rooflights, light wells, and rooftop gardens. These sorts of features, coupled with unique architectural character that will come from converting a building that wasn’t intended to be housing, present real opportunity to set your resi offering apart from the competition.
Where are we coming from?
Well, we noticed that we were amongst the precious few that have spent the last few months actively hunting out High Street commercial premises. We aren't a "normal" business - sharing aspects with at least 3 of the above themes. But, we also weren't alone in the hunt, making new friends with other organisations who wanted to do something a bit different with commercial space, and it simply got us thinking that this might be some inside knowledge worth sharing.