28th July 2022

CoStar Chaired a Recent Martin’s Properties-hosted Debate on the Challenges and Opportunities Facing Our High Streets.

These are turbulent times, both economically and politically. With rising inflation having helped soften retail sales by 10.5% year-on-year in recent times, property
and investment company Martin’s Properties invited a panel of industry experts to discuss the challenges and opportunities for the UK’s high streets and city centres. CoStar chaired the debate.

The panel comprised: Richard Bourne, managing director, Martin’s Properties, Jonathan de Mello, founder JDM Retail, Mark Phillipson, founder Eccleston Capital, Tracey Mills, executive director, Davis Coffer Lyons, Peter Thomas, director, Savills, Stephen Medway, chief executive officer, King’s Road Partnership.

There have been several re-iterations of the government’s White Papers for levelling up and building back better the country’s high streets. Whilst the numerous government initiatives have attempted to breathe life back into deteriorating town centres many in real estate argue a lack of first-hand experience in the teams behind this policy work has prevented landlords and high street communities from driving real progress.

The panel noted that one initiative that most landlords and retail advisers are taking issue with is the proposal to force landlords to rent vacant units. The panel consensus was that most landlords were actively trying to let units but argued it is not always possible if there is no demand and the environment is poor. Retailers and operators want to be in locations where consumers want to be.

The panel recognised that landlords must continue to invest in their communities to attract and secure good quality retail clients and, in turn, ensure that there are little or no vacant units. All of the panel cited many examples in London where landlords, or Business Improvement Districts (BIDs), have invested heavily to increase the attractiveness of high streets to retailers.

Martin’s Properties’ Richard Bourne said: “Our high streets need to be more appealing with a range of sectors on offer to make it a more exciting and rewarding experience. There needs to be a mix of retail, leisure, culture, food and beverage and residential to both serve the local community and increase dwell time for visitors. But there needs to be wide ranging support to deliver this.”

Bourne pointed out that the government has sought to assist landlords and communities through the introduction of Class E, which in theory allows landlords to change the use class of their retail units, removing the need for planning approvals. He said that changes to Class E have been a good initiative for areas such as London’s famous King’s Road where the changes have seen the introduction of more F&B outlets. “This clearly works on the King’s Road where we have an affluent residential base who are now more than ever keen to live, work, eat and shop locally.”

F&B, leisure, and entertainment specialist Tracey Mills, from Davis Coffer Lyons, who works with landlords across the capital to bring F&B and entertainment to their high Streets and estates, agreed that Class E has gone some way to facilitate the change. However, she argued that there are still planning hurdles to surmount, and legislation needs to go further to make more of an impact. “The best F&B operators won’t consider a premise until it has a liquor licence and appropriate air extraction systems, meaning you still have to go to planning and consult with the community, which slows and frustrates the process.”

Mills also warned that high streets with disparate ownership were in danger of cannibalising each other with an influx of the same type of F&B outlets.

Mark Philipson from Quadrant Repurpose and Eccleston Capital, travels across the country looking for opportunities to refurbish redundant retail. He said he has been shocked at the state of many of the country’s high streets. “This isn’t just a problem in the North; there are towns in the South East that need turning around on a grand scale. The fundamental problem is that these environments are under fractured ownership and we don’t have a government stable enough to deliver these projects which could take a decade.”

In the absence of a single landlord to drive change, local authorities and the government are key to driving change, Phillipson added.

Savills’ Peter Thomas expressed concerns about the government’s ability to follow through with its ideas amidst political uncertainty and a “broken planning system”, whilst private industry is running ahead.

Bourne and Stephen Medway, CEO of the Knightsbridge and King’s Road BIDs, have been working together for the last four years, alongside neighbouring landlords and occupiers including Cadogan, Crosstree, Halj Group and Peter Jones. The King’s Road Partnership was created with a view to raising the profile of the King’s Road and improving the environment despite the fractured ownership. It brought together the largest landlords in the area who had the power to implement change.

Medway says the King’s Road was given its BID status in 2021 and the footfall numbers, which continue to exceed 2019 figures, make a good case for BIDs in bringing together the community and local stakeholders in a holistic strategy for the greater good of high streets and town centres.

BIDs were a concept brought across from the US and since their inception there are now 300 BIDs in the UK. Key to becoming a BID, and the ensuing funding that is given to an area, is curating a mix of stakeholders with an overriding strategy.

Medway highlighted the importance of a permanent residential base in retail with the example of the King’s Road having recovered faster than any other London or UK high street since the pandemic. This is in stark comparison to neighbouring Knightsbridge, he said, which has lost its international second homers which has hugely impacted retail and footfall in the area. The challenge Medway highlights is to create a high street that works for the local community.

“The King’s Road continues to benefit as people don’t want to travel to shop or eat out; they don’t want to get on the tube to shop anymore.”

On a smaller scale Jonathan de Mello of JDM Retail, highlighted examples of former high street department stores being redeveloped into mixed use hubs with a vibrant mix of retailers on the ground floor leading to a desire to work in the area and the leasing of the upper floors as offices. “Food halls create a buzz for an area and make it cool.”

Bourne added that this was part of the building back better White Paper which referred to Community Improvement Districts (CIDS) which will involve the wider community groups. Bourne agreed with the principle but said there needs to be a positive approach to reforming high streets rather than a defensive one in order for them to thrive for mutual benefit.

With many high streets deserted after 5pm they are no longer a place of community and conviviality and are, at best, unwelcoming and at their worst, unsafe, the panel suggested.

Thomas believes that “bringing housing back to our high streets will give them a community at the heart to serve.” Mills agreed that local residents must be at the centre of town plans and suggested that “if you create restaurants and retail that locals want, visitors will follow.”

Further ideas and examples for high street rejuvenation looked back to successes of the past. Medway attributed the success of Chelsea’s Pavilion Road to the fact that the landlord consulted with the local community at the start of its redevelopment. “There was tremendous support for an ‘old fashioned High Street’”.

Thomas spoke about the King’s Road’s former antique and flea markets which attracted young shoppers from far and wide, and Mills pointed out that the mass of pubs at the time served to keep them there. Phillipson commented: “Up and down the country, high street pubs have been lost. Retail and offices have been driven out of town, and these need to be brought back, starting with local authority offices returning to the town centre.”

Many landlords and commentators cite the rise in online shopping as the catalyst for the demise of town centres.

However, de Mello, who advises many retailers on the impact of bricks and mortar retail to their online sales, says it is important for landlords and retailers to understand the local dynamics of demand and how it is evolving online. “When retailers open a physical store, they see an increase in online sales in that area of 10% to 15% on average. I have worked with retailers who have opened stores in new regions of the country where their brands are lesser known, and this has seen a 75%-200% increase in online sales in the area.”

Bourne agrees: “Physical retail is an integral part of the marketing mix with retail units creating a Halo effect for online sales and generating brand recognition.”

Phillipson also noted that retailers could effectively reduce the footprint of their physical store through showrooms showcasing the most popular 20% of goods with the remainder available online, vastly lowering overheads. Bourne added that a united approach between landlord and tenants was needed in all aspects of the high street. “Landlords need to think about being the operator of the unit and understand what the unit can deliver in relation to turnover. They can then work with occupiers and benefit from a collaborative approach – assisting each other to drive turnover, performance and revenues whilst creating a busy and vibrant environment.”

Business rates have long been a contentious issue for landlords and retailers. The panel were unanimous in viewing this as the area that the government needs to address first and foremost. Thomas notes that in many of London’s prime shopping areas “rates payable exceed the rent that is achieved, and these figures just aren’t sustainable.” De Mello agrees: “Unless business rates are fully reformed, we won’t see retailers look at the high street differently.”

To conclude, the panel were asked to share further ideas for high street rejuvenation.

Bourne suggested the key to the success of high street rejuvenation is to take a long term view to ensure they are future proofed and will be desirable places in 10 and 20 years’ time.

“As Landlords, we need to focus on long-term sustainability of our high streets with the health and wellbeing of its community at the core. Encouraging and supporting the ESG agenda is crucial for future generations, “Bourne added. “For example, the King’s Road has recently signed up Lampoo which is a luxury second hand store where fashion can be recycled. The Road has seen pop-up fashion rental stores such as HURR which was very popular. Other fashion retailers such as IKKS have a sustainable range from recycled sea plastic with profits going back to charities that clean the oceans. This highlights that at all price points consumers are increasingly aware of the credence and sustainability of the products they buy and their impact on society and the environment.”

This is an area that Mills and Thomas see evolving quickly on high streets with the rise of a younger consumer shopping with a conscience. Thomas commented: “There is now a critical mass against fast fashion and the disposable nature of it with a long-term view on sustainability and the environment. There is a real opportunity here for high streets to be part of this”.

Thomas also views the service industry as key to the high street’s success. “Landlords haven’t wanted to embrace hairdressers in the past, but they proved to be one of the most resilient industries following the pandemic.”

Mills agreed that the service industry had an important role to play on the high street. “It would be great to see repair shops on the high street, with a café at the front and menders at the back. This would create useful places where people wanted to go and bring different elements of the community together.”

Philipson suggests that further road quietening and creating safer high streets would in turn attract shoppers and residents to an area. “Simply changing the road’s surface deters traffic and makes it more friendly for shoppers without fully pedestrianising an area. This has made a huge difference in Elizabeth Street, in London, It hasn’t stopped the traffic but now there is a free flow of pedestrians.”

De Mello sees future success in collaborations between landlords and occupiers and he sees the role of local authorities as vital: “Local authorities play a big part in pushing the agenda for the revitalisation of the high street. Authorities need to stimulate with funding and encourage what’s working.”

Bourne concluded: “Landlord & Tenant law needs to be addressed, laws need to be in place to protect and support both landlords and tenants and put an end to adversarial relations. For the most part relations are good – we reached agreement with 99% of our customers in the first three months of COVID without the need for intervention and all of those 98% have survived and thrived.

“Business rates need to be rebalanced; there is too great a divergence between online and physical retail. Local authorities and planners need to work with landlords to deliver ESG and make areas more attractive; the increase in alfresco dining during the pandemic was a great example of this. Resolving disparate ownership issues through collaboration and BIDs to bring together a strategy which thinks about what the consumer and catchment population want to see today and engaging with them will lead to positive and supportive resident community engagement that works for all and reignites our high streets. ”

By Paul Norman, CoStar News