Failed stores present an opportunity to breathe life into our cities

We’ve explored in the past how Australian retail floorspace has been at the epicentre of structural change. Stores must evolve or die and we will need less space in the future. This leaves a significant number of redundant stores, particularly in fringe areas, that are unfit for modern retail and require repurposing.

Often located on urban sites where land use pressure is high, these assets represent excellent opportunities to deliver much needed new space to better service our businesses and communities. The experience from western countries further advanced in adapting non-functioning retail assets can provide indications of the likely direction of travel here.

Urban logistics: catering for the fastest-growing niche segment

Ecommerce has increased demand for logistics space close to customers as it reduces demand for physical retail space. The strongest urban logistics demand is in the most populous locations, which are precisely where the supply of land for new space is at its lowest. Repurposing old retail assets for urban logistics is an attractive solution.

In the UK, failing retail parks are being snapped up for logistics conversion. Prologis, an AU$176bn global logistics platform, spent £51.4m ($AU 90m) acquiring an old retail warehouse park in east London for comprehensive redevelopment, for example. In the US it has sought to convert former shopping centres and freestanding retail units for logistics uses.

Across Europe, “micro-fulfilment centres” in former retail units have enabled the rise of super-fast local delivery service platforms like Getir, GoPuff and DoorDash. These facilities are closed to the public and reuse the old store layout to stock a limited range of items which allow rapid picking and localised delivery on e-scooters or e-cycles.

Whilst one such Australian platform Milkrun recently collapsed, this is likely to reflect particularities about the business rather than the concept. Such platforms continue to consolidate and grow globally driven by urbanisation and rising consumer demand for speed and convenience.

In the densest part of Australia’s cities, we expect to see similar trends.

Living: addressing housing unaffordability whilst supporting retail

Demand for new housing is acute and is a global challenge. Repurposing retail for living not only delivers new supply to help with choice and affordability, but does so in urban locations which can maximise the ability for new residents to walk, cycle and use public transport commensurate with sustainability objectives.

A variety of retail-to-living approaches are being explored overseas. In the US, former malls are in abundant supply, typically well located in urban areas and provide large sites with access to local amenity for either comprehensive refurbishment or adaptive reuse.

In the UK, the demise of large department stores which traditionally dominated CBD retail has led to a flurry of new applications for living conversions. These schemes repurpose a derelict eyesore and inject new life into CBDs locations by footfall and generate spending for the retail stores that remain.

John Lewis, a UK department store and supermarket owner, recently pulled the trigger on plans to redevelop three former stores for 1,000 build to rent units. This is the first stage of an investment program that will construct some 10,000 homes on redundant retail sites.

This is a sign of things to come as other retailers seek to create value in the redundant space which litters legacy store portfolios.

This is already occurring here, with local players like Mirvac, Investa and Stockland completing with international investors like Greystar, Hines and Blackstone to develop build-to-rent in and around retail centres. More of this activity is likely as redundant retail sites create space for new living uses.

Mixed use: moving away from single use assets and locations

Perhaps the most common retail repurposing though is for a mix of uses. Today there is recognition that segregating land uses – an office precinct, a retail precinct, a living precinct – can lead to sterile environments which only operate at certain times.

Introducing mixed uses broadens the appeal of CBDs, provides multiple reasons to visit and increases investment viability by providing optionality and flexibility. Such uses commonly include a combination of living, urban logistics, offices, leisure, amenity or educational and medical uses.

A great example of this is the former Debenhams store on Oxford Street, London, one of the world’s flagship shopping strips.

A conversion is underway which will retain the existing core, add a further three floors to the existing five-storeys and introduce new office and hotel uses in addition to modern retail floorspace. The adjacent site, another former store, is being redeveloped for flexible office, gym and restaurant space together with a private members club.

The possibilities are endless.

New uses: An opportunity to be seized

Crisis brings opportunity.

The rising amount of failed retail space in our centres will allow the introduction of sorely needed new uses. Not only will this breathe new life into cities, but it will do so in a way which maximises sustainability goals. Viewed through this lens, the waning fortunes of retail are a boon for local communities and an opportunity to be seized.