Thanks to social distancing rules and enhanced hygiene measures, non-essential retail, restaurants and pubs have been able to gradually reopen across the UK. Cinemas, museums and theme parks were given the green light in early July – followed by theatres, casinos and bowling alleys in mid-August.
Restoring consumer confidence in the midst of a global pandemic was always going to be a difficult task, but determined efforts by the Government are proving successful. With mandatory face coverings alleviating concern for more hesitant shoppers and incentivising schemes, such as the “Eat Out to Help Out” discount helping drive sales – Britain’s high streets are seeing promising signs of recovery.
With further store closures anticipated for the coming months – there are undoubtedly more challenges ahead. While the outlook is sometimes bleak; there is still much reason for asset management firms to retain optimism. The contraction and consolidation of the high street should result in better quality, more varied, experiential uses and activities.
Turning over a new lease?
Behind the scenes, the coronavirus pandemic has transformed the traditional arrangements between landlords and tenants. Large firms, including The Crown Estate, L&G and Capco are readjusting to the more challenging climate for occupiers by offering turnover-based leases – a payment scheme which is commonplace in the USA and Europe.
Turnover-based rents can benefit both occupiers and property owners. For the former it is a way to reduce rents when trading is hard, and give landlords more when times are better. As more companies adopt this method, it may well embed itself into the UK retail landscape and become the new normal for commercial leases.
While largely beneficial for tenants, asset management firms may struggle with turn-over based rent payments. The method instigates unpredictability, creating volatile income streams – thus limiting a company’s ability to plan for the future. It is therefore arguable that this won’t be a viable solution for many landlords who rely on a fixed income to finance acquisitions, pay dividends to shareholders, and cover their liabilities.
In the post-COVID world, successful urban centres will be characterised by less retail space. With plans to turn redundant space into new homes, we can expect town and city centre populations to grow – high streets will instead focus on uniting the community, with a wide range of services.
As home working has become a permanent fixture for many businesses, we can expect ventures such as coworking spaces to flourish. Smaller local retail centres will likely prosper as more attention is paid to the specific demands of individual local communities.
Beyond the planning reforms and the redevelopment of retail space, pre-pandemic Government funding schemes (including the Future High Streets Fund, the Towns Fund and City Deals) also provide opportunities to kick-start the regeneration of some centres and high streets over the short to medium term.
At Targetfollow, we understand that there needs to be a cohesion between local authorities, the private sector, stakeholders and the community to help drive the post-pandemic economic recovery. Now is the time to turn disruption into opportunity and bring new vision to towns and high streets.