Up to 70 UK shopping centers could close amid Covid crisis | Retail business
Up to 70 of Britain’s 700 malls could be demolished after the pandemic dealt another blow to aging malls already suffering from the rise in online shopping and the over-expansion of retail spaces.
Besides those razed to the ground, many other shopping centers built in the 1970s and 1980s will be at least partly redeveloped into housing, offices or other uses as the urban landscape reinvents itself due to changes in the way we live and live. work accelerated by the pandemic.
At least 30 UK shopping centers are now at least half empty, including five with more than 80% of their stores vacant as months of mainstreet closures have wreaked havoc on businesses.
According to a Local Data Company analysis of centers in England, Scotland and Wales with at least 10 stores, 34 others have between 40 and 50% of their stores vacant. The analysis does not include outdoor business parks.
“There is no doubt that the Covid-19 pandemic has exacerbated many of the challenges we see in the physical retail environment, with malls having been particularly exposed to declining categories, such as fashion and casual dining, ”said Lucy Stainton, commercial director at LDC.
She says the domestic nature of most projects and their lack of “essential retail,” such as food or hardware, have particularly disadvantaged them, with the number of vacant units increasing as a result.
“Many malls have been around too long and are in need of a radical overhaul,” said Stephen Springham, head of retail research at real estate consultancy Knight Frank, who estimates that around 10 % of shopping centers are no longer viable.
He believes an additional 20-30% – around 200 – will need a major overhaul, with stores retained but parts of the center converted to homes, offices or other uses.
Malls and shopping streets were already struggling before the pandemic due to the shift to online shopping, the excessive development of out-of-town retailing, rising costs and a change in habits in when it comes to spending on digital experiences or services, such as Netflix and Spotify, instead of “stuff” hit hard.
Street closures and travel restrictions have only accelerated these trends, with 30% of retail spending now online. Other spending has shifted to local neighborhoods as more people work from home.
Big chains such as Debenhams, Topshop and Thornton’s have disappeared from main streets across the country amid the financial fallout while many other brands have downsized their store base, including Marks & Spencer, John Lewis and House of Fraser.
With potential tenants hard to find, shopping centers already ready for redevelopment are Broadmarsh in Nottingham, where demolition begins this month, Castlegate in Stockton, Riverside Center in Shrewsbury, Chilterns Center in High Wycombe and Nicholsons in Maidenhead . Work has already started to demolish the Elephant & Castle center in South London.
While housing may be the solution for empty shopping malls in wealthier parts of the country, the difference in the value of residential buildings versus retail can be a sticking point for developers elsewhere. The option of offices, student accommodation, amphitheatres or new covered markets, which are planned in certain places, will not work everywhere. Some local authorities, including Nottingham and Stockton, are considering razing shopping centers to build parks.
Stainton says: “There are new opportunities to use this space, like flexible offices or community spaces. Likewise, the independent sector has remained relatively resilient and where the mall space has generally been dominated by chains, owners might seek to engage new brands by creating more diverse programs in return.
But financing the changes is proving difficult for local authorities, some of which have already been burned by buying malls to see their value plummet, putting additional pressure on already tight budgets. Other than financing construction work, converted buildings may not provide the same income from business or rental rates as from stores.
The demolition of the centers also raises questions of sustainability, the whole process leading to further carbon emissions if existing buildings cannot be reused.
“It’s a very complicated process. Just building up basic finances is a big challenge, ”says Springham.