We are hearing the phrase “death of the high street” more and more frequently, this refers to the decline and transformation of the traditional high street retail areas, particularly in the UK. The decline of the high street presents several issues for both landlords and tenants, each facing unique challenges as traditional retail areas transform or become less viable. However, with every threat, there is always an opportunity to be explored. In this article, Sophie Mahood discusses the challenges faced by the high street along with the opportunities that could be pursued to stimulate it.
Of interest is the former Debenhams building on Millbrook in Guildford which is set to be demolished in the coming months. Over recent years, many high streets have faced significant challenges due to a variety of different factors, namely:
- Online Shopping: The rise of e-commerce has drastically changed consumer behaviour, with many people preferring the convenience of shopping online over visiting physical stores.
- Economic Pressures: Economic downturns and financial pressures have affected both consumers and retailers. High rents, business rates, and the costs associated with running a physical store have put many small businesses at risk.
- Changing Consumer Habits: There’s been a shift towards experience-based spending, with people spending more on dining, entertainment, and travel rather than on traditional retail.
Issues for Landlords
- Increased Vacancy Rates: With fewer retailers needing physical space, investment landlords are facing higher vacancy rates. This not only reduces rental income but also affects the overall value of their investment.
- Decreased Rental Income: As demand for retail space declines, some landlords are having no option but to offer greater rent incentive (such as a substantial rent free period or a financial contribution towards fit out works) to attract or retain tenants, which can impact their profitability.
- Maintenance Costs: Maintaining empty or underused properties can be costly. Landlords may face increased costs for security, utilities, and general upkeep of vacant spaces.
- Adaptation Costs: Repurposing retail spaces for other uses—such as residential units, offices, or community hubs—can involve significant renovation costs and logistical challenges.
Issues for Tenants
- High Rents and Operating Costs: Tenants on the high street may face high rents and operational costs, which can be unsustainable in a declining retail environment. This can lead to financial strain or business closures.
- Reduced Foot Traffic: As consumer preferences shift towards online shopping and away from physical stores, tenants may experience decreased foot traffic, affecting their sales and profitability.
- Increased Competition: Tenants face increased competition from online retailers, which can make it difficult to attract customers and maintain sales.
- Impact on Brand Image: Being located in a declining high street area can affect a tenant’s brand image, potentially making them less attractive to customers who are seeking vibrant, busy shopping environments.
What opportunities are available to stimulate the High Street?
For Landlords:
- Diversify Property Use: Convert retail spaces into mixed-use developments or other types of spaces (e.g., residential, office) to increase their appeal and utility.
- Invest in Property Upgrades: Modernize and adapt properties to meet current market demands and sustainable -making them more attractive to a range of tenants.
- Offer Flexible Leasing Terms: Provide more flexible lease agreements to accommodate changing tenant needs and attract new businesses.
- Focus on Community Engagement: Develop spaces that serve community needs and create a sense of place, which can drive foot traffic and tenant interest.
For Tenants:
- Embrace Omnichannel Retailing: Develop a strong online presence and integrate it with physical retail to drive sales both online and in-store.
- Adapt Business Models: Consider diversifying offerings to include services, experiences, or exclusive products that cannot easily be replicated online.
- Optimize Operations: Streamline operations to reduce costs and improve efficiency, ensuring the business can remain viable despite changing conditions.
- Leverage Data and Trends: Use market data and consumer trends to make informed decisions about locations, product offerings, and marketing strategies.
Addressing the challenges posed by the decline of the high street requires proactive strategies from both landlords and tenants. By adapting to new trends and market demands, both parties can better navigate the shifting retail landscape by adapting and transforming to ensure success.
If you would like any advice in relation to any commercial premises that you are looking to sell, purchase, lease or charge, please get in touch with our Real Estate team who would be delighted to help you on your journey.
