The Future of… The High Street
In the first of our brand new series 'The Future of...', we take an indepth look at The High Street. With High Street retailers struggling due to changes in buying habits, increased rents & high business rates, it's clear the High Street must adapt to ensure it continues to have a role to play in the towns and cities across the UK.
2,870. That’s the number of stores that closed their doors in the first six months of 2019.
57,000 less people now work in the sector compared to last year, whilst landlords are battling with an empty store rate sitting at just above 10%. It’s clear the high street is in crisis.
It’s not just one thing though. Increasing rents and business rates combined with an increase in online shopping (and a consequential decline in physical footfall) and the impact of rising costs such as the minimum wage means it’s been a tough few years for those brands trying to hold their own in towns and cities throughout the UK.
But with the government prepared to invest over £1bn in a rescue fund for 100 cities and an additional £900m in rates relief, and with a greater focus than ever on how the customer’s experience transcends online shopping through to a physical store, is this really the end of the high street or does it just need to adapt better? And quicker?
With the role of the bricks and mortar store set to change and the powerful impact of technology revolutionising the customer experience, it feels like there’s still time for a recovery. However, it’s possible that to survive in the future, the high street needs to look at its heritage as well as the art of the possible.
The hub of the community
The high street used to be the centre of a community, bringing people together and offering a respite from the challenges of every-day life. However, for major retail brands, this led to an ethos of ‘more is better’, with expansion seen as the key to increasing sales, whether this was in a local high street of an out of town retail park. Today, this has left a footprint of over-exposure of up to 30% for some UK retailers as the impact of online shopping and home delivery continues to gain momentum.
One possibility to combat the ‘empty store’ feel of a high street is to convert into residential property – for many areas this would be returning to what was an original blend of retail and housing that helped create such a community feel. Adding more socially-aware initiatives into the mix would also help rebuild a sense of belonging. In the US, retailers are trying everything from offering yoga to hosting fundraisers and even wine-tasting nights and instore microbreweries.
It’s careful balance as social priorities have changed from the days of the high street being the centre of a community but perhaps it’s no bad thing to encourage a little more talking and human interaction in a world driven by all things digital.
“Retailers are increasingly recognising that customer expect more – more of an experience, more choice, more personalisation, more access, more options”
Accepting that the high street is forever changed, it’s likely that mixed-use buildings will start to find their place in more city centres, creating a very different kind of shopping experience. Mixed-purpose is nothing new, but following a boom in the early 2000’s there seems to have been a real slow-down in their appeal with a struggle to find long-term tenants to fill vacant lots. However, today this trend is reversing at pace as co-working office space, high-end food, drink and leisure offerings, and even experiential hotels are increasingly added into designs of what once would have been completely retail or residential schemes.
For the future high-street, this mix is invaluable as it continues to build the sense of community with lots of pockets of eco-systems that can help sustain each other. Schemes are increasingly being designed to act as micro-neighbourhoods, offering a full range of amenities all within walking distance of each other.
Redefining the role of the landlord
In a boost for landlords and building owners, the changing face of the high-street and the appeal of the future vision means that slowly, outward investment is returning.
Following years of under-investment from the likes of pension funds, buildings started to transition into the hands of smaller owners who have had the appetite to make improvements to physical buildings and therefore increasing their value. This, combined with the increase in mixed-use developments and support from the government, will help reposition town centres into something quite special, with a true blend of facilities that can generate a retail income stream augmented by inflation-linked income from everything around it. For the likes of pension funds and international investors, this is likely to being a significant draw back to owning more of the UK high street.
On a more day-to-day basis, it’s also likely that the relationship between landlords and their tenants will have to change into more of a partnership as landlords find they need to work harder to keep their buildings occupied.
“High streets will need to reflect what’s important to their local communities, whether this is as a retail unit or something more unique”
Where historically it was incumbent on a tenant to transform their retail space into their desired vision, it’s likely that landlords will need to get some skin in the game and look at where further investment in the pre-tenancy stage could motivate retailers to commit. This is a change in thinking, requiring a landlord to think longer-term about up-front investment in the fit-out versus the potential for higher rents and future appeal should the building require new tenants.
Making cities feel more personal
In the future, high streets and city centres will need to feel different from one another to further drive appeal. Decades of influence from major brands means that for many, they could be in any city in any part of the UK and the shops and experience would feel the same.
Continuing the theme of community, high streets will need to reflect what’s important to their local communities, whether this is as a retail unit or something more unique. It’s possible that markets could have a resurgence as local, independent suppliers find their place in the mainstream, whilst the concept of pop-up stores much loved by luxury brands and those who operate predominantly in the online space could see empty units invigorated with a carousel of brands.
With retail rents and tenures being driven down, the high street will become more accessible to independents and smaller brands, whose popularity is being driven by a new generation of more social aware and socially-conscious shoppers who genuinely want to ‘shop small’.
Building on today’s change
There’s also the continuing impact of technology on customer experience that will both create appeal on the high street but also transform the experience beyond anything we could imagine. Already, augmented and virtual reality is being trialled by some major brands and the seamless integration of online retailing and apps through to the physical shopping experience is getting ever slicker. Retailers are increasingly recognising that customer expect more – more of an experience, more choice, more personalisation, more access, more options – and the only way they aren’t going to lose customers to the competition is to deliver on this.
For the high street of the future, those brands that invest in their physical stores and offer more than just a transactional purchase are the ones who will help it thrive and keep customers coming back for more.
Whilst it Is undoubtably a tumultuous time for the high street, there is no lack of vision as to how it could get back on its feet. It will take time, patience and some different thinking but it has to be worth it; no one wants to see the high-street disappear forever so the onus is on town planners, investors, architects, retailers and the host of other parties involved to make it a priority to see this change through.
Coming next; The Future of.... Shopping Centres
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