Market Insight

Urban regeneration: What is needed to turn the tide on terminal retail decline?

High streets form a vital part of our towns and cities, providing everything from cultural and community space to bricks and mortar for local businesses to operate from. Yet our urban centres continue to remain in a period of post-pandemic recovery.
June 3, 2024
At the end of 2023, Black Friday gave a seasonal boost to retail spending with spending up by around 17%, but the overall picture for the sector and the UK high street continued to look bleak.

The squeeze on discretionary spending power, interest rate stagnation and flock to online retail were the final nail in the coffin for many bricks and mortar retailers, including Wilko which went into administration. Indeed, 2023 saw almost as many retail failures as the previous two years combined, leaving retail vacancy rates at 15.3% by the end of the year.

This theme carried into 2024 and by April, total year on year footfall in our town centres was down by 7.2%, resulting in a 44% drop in retail sales according to the Confederation of British Industry (CBI) Distributive Trades Survey. Does this mean the death of the highstreet or could the tide finally turn on the rate of terminal retail decline? Managing Partner, Matthew Samuel-Camps, an expert in urban regeneration, explores.

Despite the gloomy data underpinning the retail market, the UK high street is far from dead.

Research from the British Retail Consortium (BRC), compiled in partnership with Opinium, revealed that consumer behaviour changes are having a positive impact on the UK high street.

According to the report, 29% of consumers expect to spend more on retail with most prioritising spending in hospitality and leisure. The research also showed the significance of sustainability to customers, and this will be an important factor in the success of retailers – whether on our high streets or not.

Sustainability key to retail success  

Despite continuing cost-of-living pressures, sustainability remains high on the consumer agenda, with 85% of people surveyed by the BRC reported to undertake sustainable behaviours.

This sentiment is echoed by Edward Sexton, owner of independent family-run sustainable countrywear brand, Glencroft, who said: “The most important people in retail are the consumers, the people who purchase from brands, big and small. It is essential that they are able to make informed decisions about the products they are purchasing, including information on where the products are made, the materials used and the values and ethos of the brand.”

David Thomas, Head of Energy & Sustainability at Vail Williams, added: “With Environment and Social Governance (ESG) high on the consumer and business agenda, those retailers that can deliver a more sustainable offer without the need to greenwash, will have the competitive advantage. Optimising their retail premises from an energy efficiency perspective, as well as their products, can support them in meeting their ESG goals.”

Practical ways for retailers to reduce energy usage can include everything from a shift to LED lighting, using more reclaimed materials in shop fitouts, moving to more efficient air conditioning systems to make the shopping experience more pleasant for consumers, and installing EV charging points to support dwell time.

Edward of Glencroft said: “We know from our own customers that they are as interested in the wider sustainability changes we implement as they are in the traceability credentials of our products – be it the installation of LED lighting which we’ve done, or moving to more sustainable packaging, it all matters.”

David added: “One thing we need to find a solution to, however, is a move away from heating above automatic doors at the entrance to shops opening onto the high street, which results in a significant amount of wasted energy.”

But what else do we need to see more of, in order to revive our town centre and retail offer?

Regeneration of town centres key to reinvigorate retail

Urban regeneration enables town centres to be reinvigorated and made more resilient over the long-term – provided they have the right investment.

Bracknell, Slough and Birmingham, all of which featured in the Top 5 regeneration hotspots of 2023, have each benefitted from such investment and we have seen this pays dividends in retail and footfall terms.

The £770 million ‘Bracknell Vision 2032’ regeneration project is one of the UK’s most ambitious multiphase schemes and saw the delivery of the Lexicon shopping centre which has been core to the rejuvenation of its town centre.

Meanwhile in Egham, Surrey, the £90 million mixed-use development at Magna Square has delivered 100 new apartments with affordable housing provision and retail space, which has given a sense of place and purpose back to the town.

In just a few years, Runnymede Borough Council revitalised Egham, ushering in a new era of Egham’s development. The success of the development is attracting people to live and work in Egham, encouraging new businesses to move in and more people to visit the town centre.

Whilst we have seen investment and funding go into regeneration programmes across the UK from the likes of the Levelling up Fund, there remain lots of barriers to regeneration, in particular the issue of complex land ownership.

More support for independents

Sadly in 2023, almost 2,000 more British independent stores were lost from our high streets following two years of growth spurred on by the pandemic.

One of the main stumbling blocks for independent retailers is the significant burden of business rates, and whilst some of the announcements on business rates in the Budget were welcome, they did not go far enough.

This sentiment was echoed by Andrew Goodacre, CEO of the British Independent Retailers Association (Bira) – the organisation at the forefront of championing the cause for independent traders and shopkeepers in Britain – who expressed both relief and concern about the changes, saying at the time:

“Whilst delighted to see the 75% discount retained and the small business multiplier frozen – it is a lifeline to so many independent retailers – it was disappointing to see the standard multiplier increased by almost 7%. There are many independent retailers who will now be paying more rates next year, as well as paying 10% more on labour.”

Adam Barnfield, Head of Business Rates at Vail Williams, commented: “At a time when our high streets are struggling more than ever, we would like to see more done to support small retailers with their business rates. With a General Election later in the year, we hope to see this on the manifesto radar – whichever party reigns.”

Consumers also have a role to play, and many have been quick to forget the vital role local independent retailers played for us throughout the pandemic, reverting back to their old shopping ways.

Supporting local independent retailers is important and, together with initiatives like Independents’ Day UK and Love Your High Street which are spearheaded by Bira, this will all help the cause.

Overcome retail homogeneity

UK satellite cities and market towns are undeniably over-shopped, and there needs to be an acceptance that a smaller more vibrant town centre retail offer is the way forwards if our high streets are to thrive.

The ‘multiples’ and anchor stores that were once so important and brought everyone into our town centres are a thing of the past, unless you are a major retail centre like Manchester, Leeds or London.

With the outmoded concept of the anchor store comes a unique opportunity for local authorities and other investors to rethink how they attract people back into our town centres and providing less homogeneity in our retail offer will certainly help.

The digital revolution and more online retail spending seen throughout the pandemic accelerated the shrinking market for traditional bricks and mortar stores and the movement of some retailers to out of town locations.

Here, the larger retailers benefit from a more ‘regular sized box’ and cheaper fitout costs this brings, as well as ease of accessibility, car parking and consumer convenience. This is essentially recreating the high street but in a more accessible location, with coffee shops, food concessions, veterinary practices, dentists and more.

However, this movement out of town is also creating a pivot point for smaller independents, and as high street rents come down, it is allowing more of them to compete favourably in our town centres, offering something different whilst adding colour and vibe.

Together with improvements to public realm, more cultural provision, a balanced food and drink economy and the repurposing of some buildings for residential use to improve footfall, we could see a potential town centre revival.

“There’s a real opportunity for the high street to evolve with independents, and to become somewhere for people to enjoy spending time. This is something which smaller high streets such as Bishopthorpe Road in York have done with immense success.”

Edward Sexton, owner of countrywear clothing brand, Glencroft.

Address functional obsolescence

Landlords and investors in retail can overcome functional obsolescence by making use of permitted development rights (PDR) to make changes to buildings or land without the need to apply for planning permission.

Research from Local Data Company (LDC) revealed that investment owners are taking advantage of this, with a 27% rise in retail and leisure sites being demolished for redevelopment.

David Ramsay, Head of Planning at Vail Williams, explained: “Permitted development provides a unique opportunity to change the use of obsolete buildings in our urban centres to meet the evolving needs of towns.

“With housing targets to be met, and bearing in mind the positive impact that residential housing can have on footfall and the local retail landscape, redevelopment of redundant retail space for residential use can prove beneficial to the hight street, as well as to the landowner or investor.”

More research-led recovery

Retailers that embrace innovation and new technology whilst exploring potential revenue-boosting areas, could be well placed to ride out any short-term retail turbulence and will be more likely to come out of the challenging market stronger on the other side. The challenge will be whether or not our town centres can keep pace.

Ultimately, if we want to future-proof our high streets, and the retail that resides within them (if, indeed that is the right thing to do), it will require us to change how we view our town centres and what we expect them to offer.

To inform that, we should deploy a research-led approach to UK high street recovery and the regeneration of our town centres, which addresses the needs of all stakeholders involved – from the communities that use it, to the retailers, businesses, landowners and investors intertwined with it.

This won’t be easy, however, and collaboration will be key to future success. But with collaboration comes complexity and politics, particularly as we head towards a General Election.