How post-pandemic living will redefine UK real estate

COVID-19 has shifted the living and working habits of millions of people, with big implications for Britain’s towns and cities

February 08, 2021

Redundant real estate across the UK is increasingly being repurposed to revitalise struggling urban centres and better meet the changing needs and preferences of local communities.

As the vaccine rollout picks up pace, people are readying themselves for a return to ‘normal’ but that will look vastly different to life before 2020.

Fewer people will buy goods in-store as the shift to ecommerce becomes a permanent feature of post-pandemic shopping habits. Retailers and logistics providers, in turn, will search for more central delivery depots to fulfil online orders.

Meanwhile, mass homeworking has cut people’s daily commutes and become a mainstream part of working life. Even when lockdown is lifted, most people would still like to work two days a week from home, according to JLL research.

The impact on real estate, from retail to residential, is wide reaching and is already prompting innovative approaches to repurposing space among investors and developers.

Reinventing retail

Unlike the abrupt move to remote working when the pandemic first hit, online shopping has been steadily growing over the last decade, leaving many bricks-and-mortar stores facing declining footfall. Lockdowns simply accelerated this trend – particularly among older shoppers – while also expediting the rate of store closures. There are currently 40,000 vacant retail units across the nation, a number that JLL expects to double by 2026.

Vacant retail space will become highly sought after for development

Jon Neale

“The 80,000 obsolete shops by 2030 remains relevant, it will simply happen more quickly than on the pre-COVID trajectory,” says Jon Neale, head of UK research at JLL.

Debenhams, John Lewis and Marks & Spencer are some of the major names to have suffered at the hands of changing shopper habits. Many of their former stores are now being repurposed for a future outside of retail.

New tenants already include housing developers, businesses in search of flexible office space and logistics firms seeking central delivery depots. In Cornwall, planning permission has already been granted to turn a former M&S high street store into waterfront flats. John Lewis is repurposing its property portfolio with plans to turn 20 of its sites into new homes and half of its flagship Oxford Street store into office space.

“In the right locations, where economic fundamentals, building infrastructure and demand aligns, vacant retail space will become highly sought after for development,” says Neale. “Recent changes to the planning system brought about by the coronavirus will benefit the repurposing of many of these retail assets.”

Warehouses take centre stage

Online shopping has also cemented the need for more warehouse space and delivery depots closer to city centres. Some logistics providers are taking inspiration from Asia and the U.S. with multi-storey city centre space. In Paris, a ‘logistics hotel’ is helping to fulfil city-dwellers’ fast fashion habit.

“There is an increasing demand for distribution centres and demand for logistics and technology to enable fast delivery,” says Andy Poppink, CEO EMEA markets at JLL. “We’re starting to see real global institutions partner with occupiers to solve this and multi-storey city centre distribution will be a trend in the UK throughout 2021.”

However, the impact of higher volumes of delivery vehicles and round-the-clock warehouse operations on the surrounding area also needs to be taken into consideration.

“Let’s not forget the social and community impact of these buildings and how we can better that,” warns Emma Hoskyn, head of sustainable client solutions at JLL. “Installing central logistics depots is a good example of how the built environment is changing town and city centres. We must be conscious of the impact of buildings on the people around them, as well as within them.”

But with logistics land in scarce supply, Poppink says the move to redevelop urban retail spaces could promote innovation to reduce noise, pollution and disruption.

“We may reflect in ten years time about how we rethought the use of cities and it how actually it improved liveability,” he adds.

A suburban renaissance 

The pre-pandemic housing crisis persists - JLL estimates there will be a shortfall of more than 750,000 new homes over the next five years and redundant office buildings in desirable locations are of keen interest to residential developers. 

In the Midlands, two former office blocks will undergo a £54.8 million refurbishment to create apartments and, in Dorset, a former council building and a derelict bowling alley are earmarked for new homes. 

Equally, some less well-connected areas outside of major cities could see an increase in demand as people swap commutes for extra space. 

The government’s ‘levelling up’ programme has promised £4.2 billion for transport improvement in the main city-regions outside London, and could make out-of-town sites such as business and retail parks more attractive to investors and developers. 

“Repurposing retail and office space for logistics and housing represents the abundance of supply and great demand for these assets,” adds Poppink. “Investors and developers are still figuring out what that will look like and the investment it will require but, done well, it has the potential to transform towns and cities across the UK.”

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