The COVID-19 pandemic has pressed the fast-forward button on changes that were already taking place on the UK high street due to the sharp rise in online retailing and footfall being drawn away to out of town retail parks. Although 'essential' retailers have remained open throughout the pandemic, those retailers deemed 'non-essential' and whose main income is derived from sales on the high street have had to quickly adapt to a series of lockdowns and pivot to and accelerate their online offering. Although the current business rates holiday and moratorium on landlords enforcing non-payment of rents have given retailers valuable breathing space, it has been the final straw for many and the inability to trade consistently for a year has accelerated a number of administrations on the high street.
Has COVID-19 sounded the death knell for the UK high street?
No, but it has certainly sharpened the focus on those in the high street who need to quickly adapt and innovate to ensure their and the wider highstreet's survival. 'Essential' shops have performed well during the pandemic and we have seen local town centres fare better due to people travelling less as a result of social distancing measures. Although online retail is quick and convenient, the value placed by the UK consumer on the shopping experience and being able to visit a physical store cannot be wholly discounted. This is borne out by the fact that a number of online retailers are now seeking to acquire physical stores in key locations to complement their existing offering and fully maximise on the benefits that multi-channel retailing can bring. Retailers need to harness the potential of their stores as places which are not predominantly focused on sales but present a marketing opportunity for the brand and a place to hold events and launch products as well as being a hub for click and collect services.
What's the latest with business rates?
Business rates remain a key challenge for the high street and despite some movement on this in Northern Ireland reform is required to make the system better reflect the current retail model. There has been talk of reform for a number of years however it remains to be seen how quickly the government will tackle this thorny subject.
What about leasing models?
The traditional leasing model in the UK premised on upward only rent reviews and lease terms of an average length of 5 to 10 years is not sufficiently flexible to allow occupiers to be nimble in a changing market. In response to this, some retailers are seeking turnover-based rents which strike a more even balance between landlords and occupiers and allow both to share in not only the good times but also during challenging periods. Retailers are also looking to secure more favourable break options in leases or rent suspension in the event that they cannot trade due to a national lockdown.
Are planning reforms helping?
A high number of vacant units not only results in reduced footfall for those remaining but makes it harder to attract new tenants. The planning reforms brought in by the government in England and Wales with effect from 1 September 2020 did away with a number of the existing retail, office and leisure use classes and created a new Use Class E aimed at allowing more flexible use of available space but these reforms have been greeted with mixed feelings in the sector. However, it is likely that further reforms of the planning system will come into play post-COVID making it easier to change use and repurpose surplus stores as multi use venues (for example we have seen a number of gyms in retail stores) or for residential purposes.
While the challenges for the UK high street have never been more real, now is the time for public authorities, investors and retailers to collaborate and innovate to ensure its survival.
If you have any questions or would like more information please contact Rachel Lawler, Partner.