Retail planning applications plummet 22% in a year
Planning applications for new shops have fallen by 22% across England* from 3,908 to 3,037, partly due to the effects of the coronavirus pandemic, says Boodle Hatfield, the leading private wealth law firm.
The City of London saw planning application for new shops and shopping centres s fall by 59% from 37 to 15. York was the city with the largest decline of 91% from 11 to 1. St Albans had the third-largest decrease in the country with an 85% fall in the number of retail planning applications.
Dartmouth and Totnes in Devon saw the largest decrease in applications across all 328 areas in England covered by the study, with a 94% fall.
Developers are cutting their pipeline of retail developments as the retail sector suffers from an unexpectedly long series of restrictions and Covid-19 lockdowns. Footfall on UK high streets fell 49.5% in 2020, due to the forced closure of non-essential retailers, as well as more people working from home**.
Boodle Hatfield says there are concerns that demand for some retail spaces may be slow to bounce back once Covid-19 lockdowns end. By Q3 2020, the vacancy rate for retail units across the UK had reached 13.2% from 12.4% the previous quarter***.
Boodle Hatfield says that developers will be hoping that new space that they are developing in prime locations in city centres will let much faster than more poorly located and older retail space that is currently sitting vacant.
Developers and landlords are also looking at how the large number of vacant shops and shopping centres, outside of core retail pitches can be removed by converting it into residential units. Demand for new homes has held up well throughout the pandemic and many town centres are still suffering from a shortage of housing.
Some landlords are also hoping to generate income after the lockdown by converting current vacant retail space into leisure facilities such as gyms, fitness studios and other leisure uses.
Landlords are also trying to prevent more vacancies in their retail portfolios by allowing retail tenants to switch to paying rent based on the turnover of that retail unit. Once the lockdown ends this will enables the landlord to keep units occupied and generating some rents, as town centre economies recover.
Simon Williams, Head of Real Estate and Partner at Boodle Hatfield says: “The various lockdowns have been catastrophic to the retail sector, causing developers to cut their retail development pipeline.”
“Retail sector insolvencies, including CVAs, are causing a massive increase in unused space, that is going to take some time to refill. Switching some of that space from retail uses is going to be part of the solution to that problem.”
“The resilience shown by the housing market suggests that converting a proportion of this to residential usage is going to become a popular choice. However, local authorities are going to want to ensure that this process delivers high quality housing and that it fits in with their broader masterplans for those town centres.”
The top areas UK with the largest decline in retail planning applications (%)
*Year-end September 30th
** British Retail Consortium
*** Local Data Company
This article first appeared in Property Week and CoStar.