The pandemic has caused seismic shifts in how we live, work and the spaces we use. People have been quick to give up on some, calling “the death of the High Street” and “the death of the office”.
It is true the retail sector has taken a serious hit. According to the British Retail Consortium, shop vacancy rates rose by almost 14% in the fourth quarter last year, while a net 10,000 shops closed their doors for good in 2020. Meanwhile nearly 6,000 pubs, bars and restaurants called last orders last year, according to hospitality research group CGA. Yet while the need for some kinds of buildings has fallen off a cliff, for others it is soaring. As offices in central areas of cities have remained closed, demand has been increasing for well-located, adaptable workspaces in neighbourhood high streets.
Demand for flexible workspaces was already on the rise before pre-Covid and JLL predicts that by 2030 a third of all office space will be flexible – partly a result of the boost given to the sector by the pandemic. However, coronavirus has also caused a contraction in supply, as some operators have been forced to close. In some places closed retail spaces could provide the answer to this supply-demand crunch. In Leeds, for example, we were brought in pre-pandemic by a building owner to take over the operations of an existing 16,000 sq ft serviced office to turn it into flexible coworking.
Then coronavirus hit. The restaurant, occupied by Pizza Express, on the ground floor of the building closed and the owner asked us to integrate that space into the coworking offer. Launching mid-July 2021,the prelaunch demand has been phenomenal as people embrace a new way of working.
We are not the only ones either. Plans are afoot to turn a JD Wetherspoon hotel, The Queens Hotel, in Newport into a coworking space and private members club. While Westfield London has submitted proposals to convert two-thirds of its anchor stores into coworking spaces.
There’s good evidence that the model works, too. The Wythe Hotel in New York, which pivoted into a coworking hub while closed during coronavirus, found the move so successful that it is looking to make it more permanent. There are also important lessons that coworking operators should take from retail and hospitality. These include the importance of customer service, providing attractive amenities, and having an independent feel that avoids a one-size-fits-all approach. To survive, the office needs to become a destination that you want to go to, as much as going to a restaurant or café.
However, fundamentally the success of retail-to-flexible-workspace conversions boils down to the type of building that becomes available. Unfortunately, many retail sites do not offer great enough floorspace or natural light to render them appropriate as flexible coworking areas. These spaces also need to be easily accessible for commuters: near secure bike storage, train stations and parking. Taking them on will be a risk and requires significant market knowledge and expertise to make it work.
Overall we estimate that approximately 5% of the current closed retail stock lends itself to being converted in this way. That might not sound like a much, but 5% of thousands of closed shops, restaurants and pubs is still a hugely exciting opportunity.
Our high streets have always evolved based on what people want and need. They began to develop when people stopped being able to grow their own food and be self-sufficient. There was a need for grocers, bakers and butchers. Now we can get our groceries and dinners via app, what we have all realised is that it is time and community that matters – so less time commuting to grey corporate headquarters and more in genuinely collaborative spaces or with loved ones.
Now the real estate industry must adapt accordingly and catch up with demand.