While we begin the new year with a sense of optimism that we are approaching the end of what has been a hugely-challenging period in all our lives, the post-Covid challenges for many in the commercial property sector will take longer to overcome.
Both the retail and hospitality sectors have been severely impacted across the globe as a result of the various restrictions imposed by governments during the pandemic.
And while people are likely to return in much the same numbers to pubs, restaurants and hotels as life returns to normal, the structural trends that had been taking hold in the retail sector prior to the arrival of Covid-19 will continue.
The pace of change which had been under way already in retail was accelerated during lockdown by the closure of non-essential retail stores, leading (unsurprisingly) to exponential growth in online sales.
Various reports indicate that 2020 saw online transactions account for 21 per cent of all sales in the US, up from 15 per cent the previous year (Digital Commerce 360), while in Europe it is estimated that online sales grew by an average of 38 per cent across the euro zone. Germany and Spain came in at either end of the spectrum with online sales growth of 22 per cent and 75 per cent respectively (Statista).
So have the last 10 months fast-tracked changes that were already under way or were these swings from traditional retail to online shopping merely a temporary phenomenon brought about by Covid-19?
The answer probably lies somewhere in the middle given the rush by shoppers to return to physical or “bricks-and-mortar” stores once the lockdown period had ended.
This was evidenced in an Irish context with the CSO reporting that online sales rose from just over 3 per cent of retail turnover in January/February of last year to a peak of 20 per cent at the height of the April lockdown, before falling back to below 5 per cent of turnover during the period of relaxed restrictions in the summer months.
Notwithstanding the resilience of the physical retail model it’s clear that some lateral thinking and brave decisions will be required by all stakeholders to ensure that our high streets retain their vibrancy and remain relevant and appealing destinations.
Footfall
City centres have easily been the most impacted locations during the Covid-19 pandemic. Footfall has been decimated as shops shut for extended periods and office workers and overseas visitors have been absent.
The strength and depth of the occupier market has been impacted by store closures, with many established brands leaving the high street. Vacancy rates have spiked, and the big question is where will new occupiers come from? Radical thinking and decisions are required to reaffirm the city centre as a destination be that for shopping, service or leisure uses.
We face many of the same problems in this regard as our nearest neighbours. In England, effective from September 1st, 2020, new planning laws came into effect in an effort to provide greater flexibility for owners and occupiers in leasing retail premises. The traditional use classes that define what a premises may or may not be used for have been eliminated, with fewer, broader-use classes introduced.
The effect is to allow a traditional retail shop to have multiple uses, including a café or restaurant, financial services, office, indoor sports, crèche or medical use without the requirement to apply for planning permission.
Pubs and takeaways do not fall within this new class, and will still require planning permission.
The previous laws meant that operators were limited to buildings that already had the required planning permission in place or they faced the prospect of many months of delay and work, along with the cost of a planning application.
The UK system was for all intents and purposes very much the same as our current planning system in Ireland, although we have more onerous specific planning regimes for Grafton Street, O’Connell Street and parts of Henry Street.
The statutory timetable for securing planning in Ireland is not less than three months from the date of application. This does not include the time required for an architect to prepare the application. Nor does it provide for a scenario where a third party appeal, objection or request for further information may be lodged. All told it is not unrealistic for the process to take up to six months from start to finish.
Commercial lettings
The length of leases for commercial lettings has shortened considerably over the last 20 years, and this is something that is likely to continue over the next decade as the relationship between landlord and tenant becomes further aligned. This will only result in occupiers and the use of a premises changing on a more regular basis.
While it is too early to gauge the real impact of the changes in England, should we in Ireland consider a more general review of retail planning laws? Good progress was made during the pandemic with the temporary relaxation by Dublin City Council of takeaway rules for restaurants. Would a similarly agile approach with greater flexibility, such as that introduced in England, be good for the shopping streets across our country?
There is no doubting the importance of proper planning, but is it appropriate to be as prescriptive as the existing planning laws set out? What we really require, particularly in the face of the Covid-19 pandemic, is agility and flexibility, something that the existing system does not provide.
Given the increase in vacancy we need the flexibility to implement changes in use quickly in order to have premises occupied before they fall into long-term disuse.
Should an entrepreneur who is looking to occupy a shop front on a shopping street be able to open up without the time and cost of a planning application?
Small and niche retailers are what make a shopping centre, town centre or village a unique environment to visit. Many entrepreneurs are not familiar with the planning process, and some can be put off by it, meaning units stay vacant for longer, new businesses do not open, and jobs are not created.
While different locations will of course appeal to different uses, minimising the complications involved in setting up and locating a new business is of paramount importance.
Mervyn Ellis is director of retail agency at BNP Paribas Real Estate
