"I believe there is an amazing opportunity here to turn something sad into a real positive, which contributes to local communities and supports local economies too, by repurposing these buildings into residential stock."
- Tom Simpson - YBS Commercial Mortgages
There’s no denying it, the pandemic – albeit a fading memory – was a catalyst for massive change. Perhaps the most pronounced example was the shift in how we interact, communicate and live our daily lives, including the shift towards using more technology to replace face-to-face interactions. In particular, the pandemic accelerated ‘bricks to clicks’ shopping habits, leaving high-street retail facing an uncertain future.
The consequence of this is being felt now – three years since we emerged from the last lockdown. You only need to walk down any high street, in any town or city, to find rows of once-occupied shops, now empty and without any sign of a new tenant on the horizon.
The West Yorkshire region is an illustrative example of this – since 2020, the square footage of vacant retail space (excluding retail parks and shopping centres) has increased from 506,000 square feet to 666,000 square feet in 2023. North Yorkshire presents a similar picture, with 426,000 square feet of vacant retail space at the end of December 2023.
And the signs are clear to see in the retail unit rental markets too – in West Yorkshire, asking rents are down by 1.7% so far this year. In North Yorkshire, rental growth has decreased by an annual rate of 1.5% - the weakest year-on-year performance for five years, underlining the lower demand.
While this is very sad for the high street, as well as signalling a societal change to the way we purchase goods and services, there is a silver lining – in the form of a new kind of opportunity to be grasped here – for those willing to think outside the box.
Repurposed stock
We know that there are not enough homes available across the UK, either to rent or buy and that those being built aren’t fulfilling the demand that exists. Statistics from the Department of Levelling Up, Housing and Communities show that the annual housing supply in England amounted to 234,400 net additional dwellings in 2022-23, which is similar to 2021-22. This represents only 78% of the Government’s target of building 300,000 homes per year.
This shortage of available properties is pushing up house prices, making homebuying an elite privilege in the minds of many. Indeed, our Home Truths report, published in September 2023 found that 78% of prospective first-time buyers we surveyed, believed that this was the case.
Yet despite this, we have all this surplus stock sitting on the high street, wasted. I believe there is an amazing opportunity here to turn something sad into a real positive, which contributes to local communities and supports local economies too, by repurposing these buildings into residential stock.
Taking action – but in the right way
If we can turn this idea to repurpose this stock into a reality, as quickly as possible, it would solve more than one problem.
However, care must be taken to execute such a change in the right way. It takes vision to repurpose a property that has previously been used for alternative use and appropriately develop that property to create well-designed regulatory-compliant housing stock.
In my opinion, this would only work providing all the right checks were in place to ensure that the end result meant good quality, energy-efficient, future-proofed liveable housing was created, with no cutting corners in the interest of cost savings. This is something I feel passionately about and discussed at length in a recent piece on the importance of having decent-quality homes in the rental sector.
The proof is there
We know that repurposing buildings works. After all, it’s already being done in the office space. At YBS Commercial Mortgages, for example, we’ve recently supported the conversion of office blocks into residential, such as a building close to Slough town centre which is being converted into 11 high-quality flats, including adding two additional floors to the building, along with on-site parking. This will provide much-needed housing in the local area, as well as creating local jobs.
In terms of the potential knock-on effects, encouraging more retail-to-residential conversions would create more local jobs, stimulating the local economy, and address the lack of housing supply, in time bringing down both property and rental prices.
The positive emotional impact on communities of looking at less boarded up areas of their town and city centres shouldn’t be underestimated either, and finding an alternative use for empty retail sites – sympathetically architected - would invigorate areas, encourage new kinds of food and leisure businesses in to serve their residents, and help kickstart regeneration agendas.
At YBS Commercial Mortgages, we believe that real change is needed to solve the UK’s housing crisis, and this is just one of several ideas we intend to table with policy makers. We are asking for the Government to step up and provide incentives and schemes to encourage developers to ensure building conversions are up to scratch.
Time for change
None of this will be easy, but one thing is certain – radical change is needed - we need to think differently - and this retail conversion initiative is a potential win, where a solution already exists for the taking if all those involved can work out how to regulate, support and fund it without delay – taking us one step closer to solving a much bigger, national issue.
