With the social trend moving ever further toward internet and supermarket shopping, the demographic of city centres such as Norwich and many other cities across the country, is changing. Exacerbated by the recent economic downturn, a gradual evolution in the high street has been forced to gather pace. Presently many smaller retailers and even some of the larger chains face bigger challengers due to customers migrating to the web or choosing to shop outside of town at retail complexs or shopping malls. The trend is growing to such extent that major commercial property investors are now eying the “micro centre” out-of-town shopping mall as holding potential for great returns. For example billionaire investor, John Whittaker, has held high level positions in large shopping mall based property companies, caught the headlines recently by committing his own finances to “CsC” – Commercial Shopping Centres, a FTSE 100 company which owns some of Britain’s largest malls. The grounding for investment seems to be coming from evidence of very high occupancy rates and commercial success in existing malls.
For the city centre the occupancy rate is going the other way, this poses several commercial challenges… Can commercial landlords continue to rely on retailers being able to afford their rents, rents which are premium priced based on location? Certainly the trend seems to be that of those shops vacated, not all are re-let and if they are then often not at the same rental value as before. The tangible advantages of moving into shared occupancy within a shopping mall or retail park complex, is that overheads are often much lower and in a climate where internet retail is rapidly increasing and reduction of overhead is becoming a must for survival.
Aside from business and commercial aspects there’s also a social trend developing, the public do still want to be in the city centre and that feeling of being at the centre of a collective hub is all-pervasive and unlikely to ever change. The retail industry is now not one of those drivers, it’s likely that in future you can expect the attractors for the city to be ever more the service and entertainment industry rather than things retail related. For example, the rise of the coffee shop society and an increase in restaurant numbers are two examples we can observe today. To such extent that the high street is now attracting increasing overseas investment in the guise of new food chains and with that generating increasingly fierce competition. We can also expect a growth in more recreational and entertainment based facilities in future. It is this trend of change from retail to social entertainment and a service industry which is most interesting and offers some respite to commercial property owners and also to the Norwich lettings agents who support those owners.
The unknown economic factor is where the income stream will come from to fund this social change. Will the closure of retail and the jobs associated with that be directly be replaced by a growing service economy? Or are we looking at an employment deficit where people must search outside of the city for work so as to be able to afford to live in it? It’s likely that the demographic of the city centre will be impacted by the availability of work, with likelihood of the middle-aged and to some extent middle-income population moving out of the city and travelling in for recreation as and when. This also suggests a trend towards younger people, working temporarily in the service economy or perhaps while studying, and on the other end of the spectrum those on high enough incomes to afford the premiums of central location. This kind of environment also suggests the birth of more small start-up companies often comprising single individuals, all eking out a trade and the means to stay in their desired surroundings. The internet is certainly an agent of change in terms of helping migrate retail (as we know it) further out from our towns and city centres. However it can also be a benefit to supporting the growth of a new breed of more portable web-based businesses which don’t rely on large overheads and physical space. These type of businesses can have a very positive impact in both the residential and commercial property economies. In changing times there is always opportunity and savvy property developers are recognising this, spotting opportunity to either re-invent commercial property or turn it into character residential property for letting. For example empty sole trader shops can make a great residential home or tired retail premises can be converted into multiple offices to launch new entrepreneurial businesses.
In conclusion it’s clear to see that the retail industry has been changing and still is changing for some time. In today’s uncertain economic climate and with the growth of internet retail this process can only evolve quicker. The result is an almost Darwinian mode for the high street, they need to move to lower overheads, shared infrastructures, logistic services and possibly even pooled purchases to compete. It’s not surprising that smart money is investing in the types of commercial property development that will enable this. For the city centre the future is more social, more service orientated and marketed into by this economy. The city centre will remain a desirable place to live with the residential property market seeing no real decline due to migrating retail and from a business perspective, the social connectivity benefits of the city centre help to provide the hotbed for new “infrastructure free” businesses. Watch this space!
Kings & Co Norwich is working hand-in-hand with several property developers in Norfolk to assist with this evolution. Norwich is a fine city and with efficient management of the property that constructs it, we can rejuvenate our environment both materially and socially.