In light of the even greater demand for online shopping since the coronavirus pandemic struck the U.K., you may have been forgiven for assuming that high street property values were set to enter freefall for the remainder of the year. However, instances like those highlighted in the below article belie that prognosis. As Hermes prepares to hire 10,000 staff to cope with the soaring demand for home delivery, the high street real estate market is, perhaps counterintuitively, alive and kicking through the rise of retail repurposing.
The sale of a well-located former Marks and Spencer for almost twice its guide price is indicative of the value which investors are still placing on premium locations, even if the reasoning behind that valuation has changed. As consumer discretionary spending has shifted from shopping toward leisure activities, the need to capitalise on shopper footfall from central locations may be reduced, but for other types of business, locality remains a prime concern. Footfall still significantly impacts the visibility of leisure sector businesses such as restaurants, cafes and pubs, while convenience of location is a key determinant of consumer choice both when socialising at such venues and when choosing regular haunts like gyms.
The impact of the government’s push to reduce barriers to changing the use classifications of commercial buildings can be keenly felt in these valuations. Investors appear confident that legal changes of use can be implemented, with ambitious mixed-use developments already being set in motion, incorporating commercial offices, residential homes and leisure spaces into previously retail-dominated sites. Buoyed, perhaps, by the public’s enthusiastic return to re-opened pubs and restaurants as lockdown has been eased, real estate investors are showing confidence in the long-term value of high street office and leisure space. With the government also seeking to ease the process of repurposing commercial property into residential use in order to better tackle the housing crisis, myriad opportunities are available to struggling retail properties. Both investors and sellers have sensed an opportunity to capitalise on the support that repurposing is currently receiving, and the appetite to do so appears only to be increasing.
The three-storey, 36,000 sq ft store in a prominent spot in the pedestrianised town centre was guided at £300,000 and eventually sold for £555,000 in the 9 July auction.