Is the high street the next target for crowdfunding property developers?
In a nutshell
Over the last two decades since the phenomenon of shopping online became more accessible, people have been deserting British High Streets up and down the country in droves.
As a result, the commercial property market has found itself plunged into a crisis. The ease of online shopping combined with unaffordable rents have taken some well-known names to the point of collapse.
So, what is the future of the High Street and can property developers play a role?
Britain's High Streets have undergone a bit of a rise and fall. Anyone who has walked down a British High Street recently will not be surprised by the latest news on their difficult state.
A report by PwC last year has revealed that chain-store closures are at their highest level since their audit began in 2010 and on Britain's top 500 High Streets, 1,234 shops shut between January and June last year.
Research reported in the Financial Times even suggested that about £2.5bn worth of shopping centres and high street stores are up for sale in towns and cities across the UK.
To be succinct, it's well known that a number of leading national retailers are on the edge financially and the stark truth is that if they close, it would negatively impact town centres and High Streets.
One example is the collapse of BHS two years ago. Its closure left empty units in around 200 shopping centres and High Streets across the UK, and more than half of those large, empty units have not yet been filled.
Other household names like Debenhams, House of Fraser and Marks & Spencer have had to shut countless stores just to stay afloat, leaving hundreds of people without jobs.
If the High Street as we know it is destined to be consigned to a nostalgic part of our memory where business and commerce is less ruthless, could this have a detrimental effect on the UK property development market?
What does the data say?
All this data sounds fairly bleak for shop owners, and it's not just commerce that's affected. The UK property development market is being unwillingly sucked into the crisis.
Consider that over ten million people live on, or within 200 metres of a high street, equating to over 16% of the entire British population, and there's a lot of property not being developed due to it being located in stagnant areas.
As a result, the downturn of these once prosperous, bustling spaces means that surrounding house prices could drop substantially and vast areas in the middle of towns and cities will fall into decline.
To try and combat this, the government is aiming to invest in these economically waning areas and a new process called "levelling up" is being implemented. It's hoped that this will rebalance the economy and halt the alarming slump to which high streets have been subjected.
"A £95m regeneration fund has been raised by the government to spend on refurbishing and revitalising 69 High Streets across the UK. With £52m coming from the Ministry of Housing, Communities and Local Government's Future High Street Fund, £40m from the Department for Digital, Culture Media and Sport's Heritage High Street Fund, and £3m from the National Lottery Heritage Fund, the money is expected to drastically transform the target areas."
If this cash injection does happen, it will be extremely welcome as far as property development on the UK's High Streets is concerned.
Research shows that 81% of us still shop offline using the High Street on a regular basis. So, if High Streets were to undergo a facelift, would property developers, landlords and buyers see the benefits?
What direction could the High Street go?
It's possible that all types of commerce that you can't do online should survive. This is why hairdressers and barbers, tattoo parlours and beauty salons all thrive despite rising rents. The exceptions include betting outlets, highly discounted convenience stores, fast-food restaurants and charity shops.
However, developers and town councils alike are keen to avoid what are known as "clone High Streets", where each is alike whichever town or city you find yourself in.
Back in 2011, Mary Portas, a retail development consultant to David Cameron, lobbied against "clone High Streets" and campaigned to remodel High Streets around independent shops. However, stemming the tide of supermarkets offering more and more amenities that independent shops once provided proved impossible. Nowadays, the butcher, the baker and the candlestick maker all work at Tesco.
Property developers are increasingly looking at food and drink to seed regeneration. This has been inspired by The Market House in Altrincham.
"In 2010, 30% of Altrincham's shops lay empty. In 2014, the Market House opened – a communal dining hall of independent kitchens attached to a speciality market.
"Since then, a remarkable ecology of bars, restaurants and coffee shops has evolved around it. Footfall has risen sharply, shop vacancy rates have fallen to 9.7% and brands such as JD Sports and Nando's have moved into the town's once-failing shopping area."
The government also wish to encourage private property developers to invest in these areas. After all, there are endless possibilities that many private property developers would love to invest in.
Replacing dilapidated and empty buildings with modern bespoke flats and apartments, whilst converting existing buildings into attractive residences is a very popular idea.
Former Culture Secretary Nicky Morgan once said;
"Our nation's heritage is one of our great calling cards to the world, attracting millions of visitors to beautiful historic buildings that sit at the heart of our communities. It's right that we ensure these buildings are preserved for future generations, but we should also make them work for the modern world."
What she was implying is that these old buildings could be converted into much needed housing.
Residential developments in city centres are especially popular among property developers and investors due to their positions in established locations.
Examples of success stories for residential conversions include Stone Cross House in Bolton, and The Sorting Office and Station Terrace in Preston.
"Bolton, Europe's largest town and just 20 minutes by train from Manchester, currently has the perfect combination of low property prices and a growing population, making it an ideal opportunity for investors seeking a low entry point with huge potential for the future."
Jennifer Edmonstone, a local property developer added;
"Bolton has a lot going for it. It's only a 20-minute commute to Manchester city centre, and the existing local economy and rental demand is strong. Stone Cross House, with its affordable price points under £125,000 and short renovation period, makes for an attractive opportunity."
Matching the housing crisis
It seems only logical that in a housing crisis, where the UK is suffering a huge shortage of homes, property developers should look towards the regeneration of the High Street as an opportunity.
One sector needs saving and can offer much sought-after development space, and the other needs expanding and is in under-supply.
What's more, with sites available for residential development becoming increasingly scarce, developers are being forced to adapt and focus their efforts on alternative opportunities.
Town centres, shopping centres and High Streets traditionally all benefit from good-quality infrastructure, transport and amenity space. So these locations have all the ingredients to be transformed into thriving communities that provide much needed housing in locations where residents can be better serviced by the retail and services required in the modern world.
With the UK facing a severe housing shortage, creating homes on top of shops should also be a focus. Spaces above shops, once used for stock and administration, have become obsolete and are consequently haemorrhaging capital value.
A recent study found that more than 25,000 homes could be accommodated atop commercial and retail property in central London alone. Homeowners look for a good location, amenities and connectivity and High Streets generally meet all these criteria.
If High Streets become genuine residential locations, they could meet all the needs of those living there and create thriving micro-communities.
Are there any negatives of property development on Britain's High Streets?
Redeveloping declining areas in the centre of towns and cities is no easy task, however much money is invested. In addition to this, property developers must be careful not to simply mimic successful projects they've seen elsewhere.
The aforementioned Market House worked because Altrincham is an affluent town on the Cheshire border. Staying in Lancashire, if a similar project were started Blackpool or Burnley, the chances of it succeeding would be greatly diminished.
Regenerating city centres under the artisan food and drink model can seem overwhelmingly middle-class, something which wouldn't be embraced in large numbers of the UK's more deprived areas. In fact gentrification can alienate the local residents who have grown up in the area and it's clear a sensible mix of ideas needs to be laid down. It's all well and good opening craft beer bars in Blackburn, but not when it's £6.50 a pint.
This brings us back to residential development. Matt Thomson, head of planning at CPRE, said;
"We welcome any reasonable measures that lead to the more effective use of previously developed land, and support the increased densification of urban areas."
A change of mentality for the High Street
It's likely that we'll have to change our mentality towards the High Street in order for it to survive. What was once the central hub of the town where cobblers mended shoes, your local baker baked your bread, or the family butcher cut your steak are probably gone forever.
But, when we factor-in empty buildings, many of them listed or of aesthetic importance within towns, and a national housing crisis, it does seem that the future of Britain's High Streets lies with a residential renaissance and probably with the help of alternative finance and property crowdfunding platforms.
However, redeveloping and creating this living space doesn't automatically mean creating monstrous skyscrapers and soulless flats. With a sensible approach that serves the local community, property development could have a positive impact on our declining High Streets, bringing value to property owners and curating experiences that bring consumers back time and again.
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