Opinion

What place do flexible offices have next to retail?

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21/05/2020

By Tom Whittington, Research Director, Savills

There is no doubt that the unprecedented and uncertain times that have been created across the globe as a result of COVID-19 have had a huge impact on all real estate sectors, but in particular retail and leisure. However, looking forward we could see a trend that was already underway pre-COVID-19 become a key part of reimagining some areas of retail as we enter a new kind of normal.

Blending retail and workspaces is not a new concept, however we are now seeing several consumer trends aligning that make incorporating space as a service with goods on demand an attractive proposition.  Add in the growing blur between home, work and social lives, a desire for sense of place and community and the need social integration, and we are left with an even greater need for more mixed use schemes with a focus on placemaking.

Like many trends that started in the most prominent cities, flexible working is filtering down to regional towns across the country and is providing a shot in the arm for retail centres that suffer from high voids and falling footfall.

Long term structural change in retail has resulted in many large units within a town centre setting, often ex-department stores, becoming redundant or marginalised due to pitch shift, or a general declining need for retail space.  However, if we can reduce exposure to retail where it is no longer needed and bring in alternative uses, we have the opportunity to revitalise these areas and make them more akin to town centres of old, where people would live, work and play. Indeed, many of the unused retail spaces provide an opportunity as much of the urban fabric is already there.

The flexible workspace model is already proving to sit well with retail and being used as an alternative use in units that have become marginalised and redundant.  Having a range of resources within easy reach, such as shops, restaurants and entertainment facilities, are a magnet for office workers.

Stockport, which has struggled with high retail vacancy for several decades, largely on the back of over development of out of town retail is a prime example where we have seen flexible space support the high street. In 2018 Marks & Spencer closed its store, which had the potential to leave a large blight on the high street as low retail occupational demand in the town would have made re-letting the space a significant challenge. However, while Stockport is over supplied for retail it is undersupplied for offices and developer Glenbrook seized the opportunity to access a significant floorplate in the heart of the town centre. The new flexible office scheme, STOK, will increase footfall and further diversify the town centre. Instead of standing empty, shoppers will see the historic building remain an important part of the community.

This isn’t the first time a large empty department store has provided a catalyst for regeneration.

A former 80,000 sq ft Grade II listed Co-op department store in Sheffield that was once at the heart of the city centre’s retail offer closed its doors in 2008. A decade later following a £3m funding deal between the City Council and regeneration company U+I life this once dilapidated but iconic building now comprises an exciting mixed-us destination. One of the main parts of which is a flexible working environment is delivered through Kollider Incubator specifically designed for businesses and ambitious entrepreneurs to scale quickly.  At the heart of the developer’s ethos was the need to provide a catalyst for regeneration in the wider locality. The curation of food hall Kommune has the core aim of providing a public focussed use to increase visits and socialising in the building and now attracts 7,000 visitors a week. Since opening new operators have moved into the area and neighbouring buildings are being refurbished for a variety of uses from offices to residential.

We have also seen shopping centres embracing the flexible office market. In Marlands Shopping Centre, Southampton, developer Ellandi repurposed a vacant unit previously occupied by Matalan into the city’s first collaborative, co-working environment, powered by Barclays Eagle Lab. 

In the Merrion Centre, Leeds, Town Centre Securities took an unlettable retail unit and opened a free workspace environment for visitors to “meet, connect and charge”.  This provides flexible offices in a ‘pop up environment that fills empty space and gives the landlord time to consider a  long-term solution for the unit.

Retailers are also reviewing their space requirements and many with larger stores are turning to flexible offices as a complementary use within their buildings.  Overseas examples include Staples providing coworking space in U.S. suburban locations under its Workbar brand, and Carrefour’s Urban Life supermarkets are offering shared workspace in Milan.

As our work, home and social lives have become increasingly entwined in recent years there is more reason than ever to blend different property uses together.  This is part of a long term trend, but the Covid-19 situation brings these trends sharply into focus and is likely to accelerate the rate that these changes take place.  Employers, workers and consumers will quickly learn new ways of balancing their lives that could stand the test of time, long after the pandemic has passed. 

Long term therefore, we expect flexible offices to provide an increasingly important solution for supporting retail spaces. Either way, it looks evident that when different property uses merge they can increase footfall, engagement and vitality, while enhancing the resilience of those locations.