Real Estate Adaptation and Innovation: An Investor’s Perspective on the Diversity and Spatial Changes in the UK Retail Sector

Retailers, like many businesses, operate in a fast-moving competitive environment and need to rapidly change to keep pace with their competitors. There is nothing new in this but the nature, scale and pace of change has intensified in recent years with many retailers reported to be struggling to manage the rise in operational costs and the disruptive effects of technology, greater competition from online retailers who appear to operate more efficiently, changes in consumers’ spending habits and, more recently, the unsettling disturbance of business operations by the Covid pandemic restrictions. As a consequence of this prolonged period of change, many well-known high street retailers have entered administration or been forced to use firefighting measures to avoid bankruptcy. There is also the general recognition that many ‘bricks and mortar’ retailers are being forced to downsize their property portfolios as a way of reducing their overheads. Such store closures have a visible impact on the high street and one which is increasing as the number of vacant units continues to grow. The concern of policy-makers has also been well documented and debated. The sheer scale of the contraction in the retailing sector, an industry which dominated most urban economies, has resulted in obsolete building stock and the physical decline of these urban centres. The challenge is for them to find new ways to encourage and support the adaptation of urban centres into multi-functional places that are less dependent on a single land use and more resilient to future change. Yet, the effects of these urban changes and the implications for landlords have largely been ignored within the high street debate. This is surprising as many of the tactics being employed to make urban centres more attractive and competitive – such as the re-development of obsolete stock, experimentation with land use innovations, creation of mixed-use developments and the re-imaging of the public realm– rely heavily on private-sector investment. If policy-makers are going to succeed in encouraging future investment in the continued renewal and adaptive of urban centres they need a better understanding of the market changes experienced by property investors, and the impacts on the investment quality of retail investments and property ownership. This paper seeks to address this knowledge gap. It reports the findings from a larger ongoing project that is exploring the adaptation of the retailing sector using the five case study cites of Edinburgh, Glasgow, Hull, Liverpool and Nottingham. This stage of the study, using linked data from a number of secondary sources, examines the spatial changes that have occurred over time in the principal retailing areas of these cities. It does so by monitoring shifts in land use and heterogeneity of occupiers, and mapping the spatial patterns that have occurred in these land use changes as new developments have occurred before investigating the resultant changes in property investment behaviour. The paper ends by examining and discussing the consequence of these outcomes for the retail investment market, investors and the High Street.