Over the past few years, the high street has undergone significant transformations to meet the evolving expectations of modern consumers, making it a much more diverse and inclusive space.
However, with the impact of COVID-19, several businesses are struggling and shutting down, leading to an increase in vacant properties. As a result, commercial-to-residential conversions have emerged as a viable opportunity for individuals looking to reside in areas with excellent transport connections and proximity to local amenities, creating new opportunities for property developers and investors on the high street.
Some of the changes that have taken place on the high street are a direct result of the global Covid pandemic and the measures that were put in place to manage transmission. Many retailers saw their profits fall as they had to either close completely for a long period, or saw significantly lower foot-fall on the high street, and were forced to close stores or downsize. The high street was hit particularly hard by these changes because many people became more likely to shop online than visit shops on the high street, which was accelerated by the covid lockdown but has continued into an ongoing change in habits by consumers. There are fewer, but bigger stores, which means that some independent businesses have struggled to compete with the prices offered by larger retailers. These changes have led to an increase in empty retail space, which is prime to be converted into residential properties.
The number of shops closing down has increased, and the number of empty shops has risen. It's not just the high street that's affected: many shopping centres are struggling too. Why is this happening?
The main reason for shop closures is that companies aren't making enough money from their stores to be able to afford them. This means they might have to reduce the size or close down altogether. The problem is that it costs a lot more money to keep a shop running than it does to run an online store, so many small retailers can't compete with big chains like Amazon and ASOS (who own several famous fashion brands). The best thing about owning an online business is that you don't need as much space as a normal store does—and even though you do have some costs, such as marketing campaigns, these tend not to be as expensive as what you'd pay in rent on your bricks-and-mortar outlet! Additionally, many shops had to have storage within their retail premises to stock their shelves, which was charged at a premium due to the location, but an online store can either order their stock on-demand (once a customer orders it) from the provider, or they can have their stock stored in storage away from expensive high-street real estate. Even if stores are now partly online and partly high-street, they are likely to need less space.
💡 Tip: This is an opportunity for commercial to residential developers - many retailers are in long commercial contracts, which have previously been a challenge for a new owner to face as they need to get existing tenants to agree to building changes/renovation, but many of these tenants will be more open to changing their existing contract than they may have previously done.
The high street is changing, and it's not just because of the impact of online shopping. Banks have been closing branches across the country, with some areas seeing a 30% drop in branch numbers in just five years between 2012 and 2017. This is partly because banks are moving towards providing financial services through mobile and online channels rather than using physical branches. However, there's another reason: it costs banks a lot to run these sites. With low footfall due to people doing their banking on the go or at home instead of going into town, they're simply not worth maintaining anymore - unless they can be converted into residential property!
In 2015 RBS closed more than half of their branches and plans to close almost 400 more by 2022.
In November 2022, HSBC stated that they will be closing down around 400 branches in the United Kingdom by 2022. They said they will only be keeping branches that are used by more than 500 customers a day and have over 10,000 square feet of space. This means that many towns and villages across the country could lose their main bank branch altogether.
You might recall that in 2007, the smoking ban was introduced, and pubs began to close down. Many people believe that this was a contributing factor in the number of pubs closing down. However, in 2013 alone, 1,000 pubs closed down - which suggests that there are other factors at play when looking at why so many pubs have been converted into residential properties.
Some of these other factors include changing drinking habits as well as high taxes on alcohol and low profits due to supermarkets selling alcohol at cheaper prices than bars can compete with, along with changes to the way that people socialise due to the internet.
💡 Tip: Nimbus Maps allows you to search by owner name, including company name, so you can find all of the pubs in your desired areas easily. Click here to get a free, no obligation demonstration of how to do this.
The closure of post offices has been a big change for many people, with more than half closing down since 2010. The government is now looking at ways to help them stay open and attract new customers.
Post offices have great potential for redevelopment into residential properties, which could be used as buy-to-let investments or homes for sale.
Landlords have to pay business rates even on unoccupied shops. Business rates are a tax on commercial properties, but residential properties are exempt. The amount you pay in business rates depends on how much your property is worth and what type of property it is (i.e., whether it's a shop or office).
With an increasing number of commercial properties being empty and a reduction in the number of new businesses opening in retail locations, many landlords are now willing to sell their empty properties for conversion to residential property.
Empty shops in town centres can be an opportunity for conversion to residential use to help revitalise town centres.
Business rates are a major disincentive for owners of vacant commercial property, as they are often more expensive than letting the space out as offices or shops. This presents a challenge for local authorities wanting to increase the housing supply.
If you want your town centre businesses to thrive, it’s important that empty retail units are quickly converted into homes or other uses, which bring people into the area and encourage others who live nearby to shop locally.
The high street is no longer just about shops, it's also about cafes, restaurants, bars and other places to eat and drink. This evolution has been driven by the changing expectations of shoppers.
The high street has evolved to meet the demands of today’s consumers. It’s no longer simply a place to go out shopping - it has become a social hub where people can spend time with their friends or family after work or on weekends.
The high street is changing. Long-term empty property is becoming more common, and commercial to residential conversions offer an opportunity for many people who want to live in places with good transport links and close to local amenities.
This phenomenon has been seen throughout Europe, where the number of properties left vacant by businesses has increased significantly over the past few decades. The UK saw a 17% rise between 2015 and 2017 alone, with around 2 million buildings standing empty across England as of 2018 (source: Empty Homes). It's not just big cities that are affected; small towns are also seeing increasing numbers of empty shops due to a lack of demand - there were 1584 postcode districts with at least one empty shop during this period (source: Empty Shops).
Many councils are pushing back against this change, keen to preserve the look and feel of their high streets without considering what the changes might mean for local residents.
These councils are not wrong to be concerned about the impact that large corporations have on small businesses and communities. But in trying to create an environment that is more sustainable for local people, we need to consider how much we rely on big business in order to succeed as a society.
However, this also presents an opportunity for property developers with good local architects to get support from the councils if they design a project that will both meet the goals of increasing valuable housing stock while still preserving the look and feel of the high street.
If you're looking to buy or rent in an area with good transport links, local amenities and plenty of culture, commercial-to-residential conversions can open up housing opportunities for people who might not otherwise be able to afford it.
While the high street has changed over the last few years, it`s still full of opportunities for people who want to develop commercial property into residential or mixed-use property. The changes have been driven by consumer demand and a changing economy; there are still many people who want to live in towns with good transport links and access to local amenities.