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QD view – too late to save property’s problem child?

What to do about empty shops? The problem child of the property sector has been causing headaches for landlords for years. That headache has turned to a head-splitting migraine since the COVID pandemic.

As much as 30% of retail space in the UK was thought to be surplus to requirements before the pandemic. Now, with irreversible trends accelerating towards online retailing making it a bigger part of overall retail sales (36% in January 2021), that number has surely grown.

Marks & Spencer, John Lewis, Debenhams, (frankly this list could get pretty long) have all shut stores and are reducing space. It leaves retail landlords, especially shopping centre owners, with a big problem.

Capital & Regional, which owns seven malls across the UK and has been battered during the pandemic, has gone someway in attempting to find a solution to the issue.

In full-year results published this week, in which property valuations fell a further 27.5%, it revealed it has signed an agreement with a company to better utilise underused space in the malls.

REEF Technology will initially work with Capital & Regional at its Wood Green and Luton malls to introduce alternative uses to underused areas, especially car parks.

Potential options include kitchens that can be used by dining firms for delivery-only services, and urban farms, “utilising vertical hydroponic agricultural technology which are able to satisfy demand from businesses and consumers for products that are locally grown”.

Other uses for space might include storage facilities to aid last mile logistics, and e-scooter rental stations and electric vehicle charging points.

Capital & Regional said discussions were also underway with regards to bringing alternate uses to parts of its Walthamstow and Ilford sites.

Getting creative with the abundance of surplus retail space is certainly the way to go for shopping centre landlords.

Malls are generally over-rented and rental levels still have some way to fall before they reach an equilibrium. Getting unused and empty space income producing again is of paramount importance if malls are to become viable again.

That isn’t going to be through retail and leisure alone. Shopping centres need to become a hybrid of multiple uses incorporating residential apartments, flexible office space, healthcare facilities, urban logistics as well as the aforementioned retail and leisure.

Shopping centre owners like Capital & Regional are all taking steps down this road. Whether it can be done quickly and cost-effectively enough is another question. My feeling is it may be a case of too little, too late.

1 thought on “QD view – too late to save property’s problem child?”

  1. It would help if the government could bring forward changes to the business rate system. A tax on turnover would be better than a system based on an outdated valuation. Government and local councils have always considered retail businesses both large and small as cash cows able to pay any bills thrown at them (include refuse collection over and above the business rates). No wonder shops are closing!

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