Retail’s constant adaptation presents architectural opportunities

Closing-down sales, boarded-up shops, the death of long-standing retail brands – all familiar signs of the decline of modern Britain’s high streets. In some towns and cities, the decay and loss of local retail icons goes back decades. But the rot has spread and deepened.

This hasn’t gone unnoticed. More than a decade ago David Cameron and Nick Clegg commissioned retail guru Mary Portas to conduct an independent review into the problems of Britain’s high streets and come up with solutions. In 2018, high streets minister Jake Berry formed an expert panel chaired by the retail entrepreneur John Timpson to do much the same thing.

Worryingly, in her 2012 report, Portas stated: ‘I believe that our high streets have reached a crisis point.’ If it was a crisis then, things are even worse now and the data points to worse to come. The latest retail sales underline why. These figures not only capture the pain inflicted by the ongoing cost-of-living crisis. They also reveal the impact that online technology is having on sales on the high street and in other physical stores.

While this cocktail of challenges is inevitably toxic for retailers, you might understandably ask: what has all this to do with the construction sector and the work of architects? The simple answer is lots. How we buy and sell things has for millennia been a major factor shaping our built environment. So, it is both appropriate and important that architects appreciate and interpret the forces of change we are witnessing in the retail sector.

Let’s have a look at the numbers and some charts.

Chart 1 (below) shows how the volume of retail sales grew strongly from 2013 as the recession caused by the financial crisis abated. The recovery moderated slightly after the EU referendum in 2016 but growth continued up until the pandemic.

Inevitably, retail sales slowed in 2020 with lockdowns restricting spending. With holidays and eating out curtailed, this created a build-up of savings, which then fuelled a spike in spending in 2021.

Since then, however, there has been a steep decline. The cost-of-living crisis has led consumers to batten down the hatches. The volume of retail sales in December 2023 was the lowest December figure since 2017. Adjusting for population growth, per capita retail sales are the lowest since 2015.

This is clearly very bad news for the shop-based retail sector and for what is proverbially described as the high street. But as has long been recognised, a bigger threat than falling demand is tech-based change, as consumers switch to shopping online.

While sales in physical stores declined following the 2007/8 financial crisis, they slowly recovered to reach a new peak in 2019, despite strong growth in internet-based retail. Rising incomes and population growth supported both footfall and sales in the shops.

But then came the pandemic. Online sales inevitably rocketed and, as the chart shows, the new habits formed during Covid created a rift with the past. From below 20 per cent of retail sales in 2019, the level now seems fixed above 25 per cent. The pandemic fast-forwarded the already entrenched drift to internet-based retail.

The impact of both falling retail sales and a greater share of these being online means the volume of store-based retailing across the UK was almost 11 per cent lower in 2023 than in 2019. With shops paying hefty rates and rents, the battle with online shopping was always going to be a struggle.

Footfall data from Springboard, published in the Office for National Statistics real-time indicators publications, shows the numbers visiting retail outlets failed to recover. For more than two years, footfall has been running at about 15 per cent below pre-pandemic levels. But it is worth noting that the hit has been mainly taken by shopping centres and high-street shops – retail parks have weathered the storm better.

Data on retail vacancy rates from Local Data Company shows vacancies had been on the rise after hitting a low of 12.2 per cent in 2016. In 2021 they peaked at 15.8 per cent. Shopping centres appear to be taking the hardest knock with the average vacancy rate about double that seen in retail parks. High street vacancies have been running somewhere in between the two.

Falling retail activity and rising vacancies inevitably prompted moves within the property sector to shrink retail floor space. And as the immediate post-pandemic spending exuberance morphed into a cost-of-living crisis, there has been a fall in the number of retail outlets. Not that the pattern of decline has been evenly spread across the UK.

What does this all mean for the construction sector? Put simply, the demand for new retail construction is evaporating and has been since its heyday in the late 1980s to early 2000s. From a major driver of development and construction work accounting for around 10 per cent of all new work, retail now accounts for less than 2 per cent, as we see in Chart 2.

But there is another critical element to this story that is important for those planning and delivering the built environment. As demand for physical shops dwindles, there is a rising tide of unused and unusable retail floor space. This once expanding, but now shrinking, floor space had been a huge draw, tempting consumers to the nation’s high streets, filling once vibrant department stores, boutiques, kiosks, jewellers, music and food halls, newsagents, post offices, bakers, butchers and hardware stores.

Shops are, at least for now, central to the functioning of towns and cities. Their loss is widely expected to bring dysfunction. It is worth noting how retail at its peak had very evidently moved from simply buying what you needed to a form of entertainment and social interaction. Indeed, from the mid-1980s the term ‘retail therapy’ became commonplace and was amply displayed in Sex and the City, a TV series popular in the late 1990s and early 2000s. This social aspect of retail is not lost on developers of online retail platforms, who are working hard to build entertainment and social interaction into their offerings.

The Valuation Office Agency (VOA) figures for England and Wales provide a view of how much floor space is being lost. From the high-water mark of 2019, there was a drop of more than 2 million m² of rateable retail floor space in the four years to March 2023 (Chart 3). That is about 2 per cent of the stock. That may not seem a high proportion, but it equates to more than 2,000 Tesco Metro stores. And this fall in floor space looks set to continue.

Interestingly, the number of stores had been plunging for years as average store sizes increased and newly built retail parks mopped up customers from the high street. But in 2009 the tide turned. The number of shops began rising and in 2021 there was an upward blip as the pandemic subsided.

Part of the rise can be put down to retailers such as Tesco and Sainsbury expanding their network of local shops. Also, more recently, space seen as excess by retailers of big stores has been let to smaller businesses. The number of shops, pharmacies, salons, and kiosks within major stores has risen significantly. But with cost-of-living challenges increasing the number of retail outlets, as recorded by VOA, has dropped since 2021.

The pattern of change is far from even across the retail sub-sectors and locations. Regionally, for instance, London has seen the sharpest fall in rateable floorspace, down by about 3.5 per cent between 2019 and 2023. But the number of retail spaces has risen slightly. The worst hit areas have been in inner London, with Westminster seeing a decline of 11.5 per cent in rateable floor space. The figures show rateable floorspace in the north-west of England down 2.6 per cent with a decline of 3.6 per cent in Greater Manchester.

A fall in floor space tells only part of the story. The faster decline in London and Greater Manchester may well reflect the greater ability to repurpose retail property for more profitable uses. So, in more vibrant property markets where there is stronger demand across other sectors than retail, vacancy can be better contained.

According to Local Data Company figures, across the nation there has been a surge in redevelopment work. Much of this will inevitably be in London. It has the lowest vacancy rates across the whole property market, which likely reflects its vibrancy and a faster pace of repurposing from one sector to another.

It should be reiterated that the picture is not one of decline universal. In some locations, the level of retail floor space recorded by VOA is rising. The Leicestershire village of Blaby, for instance, saw an increase of 17 per cent. This relatively well-to-do area, to the west of Leicester, already has a strong retail presence and is far better connected to the road network than most districts.

Furthermore, there is a rapid shift between the types of retail underway. Post offices, newsagents and banks are among those retreating, while convenience stores, vaping shops, fast food and nail salons are on the increase.

Retail and the desire for humans to trade have been central to the development of the towns and cities we inhabit today. The places where we come together to exchange goods and money have morphed over centuries and continue to do so. This in turn reshapes our built environment, sometimes subtly, sometimes significantly.

From occasional markets in ancient times, the retail experience has morphed to fixed shops in towns and cities, to department stores and arcades in major cities and the development in the 19th century of the notion of the high street in towns. Constant change has brought constant threats to retailers.

1956 saw the opening of Southdale Mall in Edina, Minnesota. Designed by Austrian-American architect Victor Gruen, it is the first and the oldest fully enclosed, climate-controlled shopping mall. In many ways it can be viewed as a reconfiguration of the high street notion, perhaps with a nod to the arcades seen in many European cities. The concept spread. In the 1990s, as retail surged, a rash of major malls was proposed across the UK. While this generated excitement, it also generated fear that they would kill the already struggling high street.

Change is ever-present in the built environment as the needs of populations perpetually reshape. Addressing these changing needs creates both challenges and opportunities.

However, the pace of change varies greatly over time. Today is it rapid, accelerating the need to address its challenges. But whatever the pace of change, it can be argued that architects are, or at least should be, at the forefront of this constant adaptation.