Insights

Revitalising retail centres impacted by COVID-19

Posted July 31, 2020

SGS Economics and Planning pop up retail florist

By SGS Researcher Landon Brown and SGS Principal & Partner Luke Nicholls.

Temporary leases and pop up stores could revitalise retail centres and high streets impacted by COVID-19. It’s not a new idea, but it’s a good one.

While the effects of the COVID-19 shutdown are yet to be fully understood, social distancing and lockdowns have had a significant impact on the retail sector – notably bricks and mortar retail. As restrictions ease across some states, and retail centres start to reopen, pop up store and temporary use leases could provide a simple yet effective short-term tool for activating empty shop fronts.

While not a new idea, temporary stimulus strategies offer a short-term option for activating local centres and provide a low-cost solution which relies primarily on the creative and social capital within a community. Temporary use strategies provide the flexibility to overcome unfavourable economic conditions, both cyclically and in the long term.

SGS Economics and Planning closed retail due to COVID 19

The COVID-19 effect on retail in Australia

With the outbreak of COVID-19 and subsequent lockdowns, many people have become increasingly accustomed to using technology to socialise and purchase goods and services online. This change is expected to galvanise the current structural changes occurring in our economy – particularly the decline of traditional retail. Reduced Gross Domestic Product (GDP) and dramatic increases in the national rate of unemployment are also predicted as a result of months of nationwide lockdown.

Based on current projections, there are only two economic events comparable to COVID-19: the beginning of the First World War and the Great Depression. In the case of WW1, major economic contractions were brought about by a halt in global trade, coupled with disruptions caused by workers leaving jobs and enlisting in the war effort. This scenario has clear parallels to the current impact of COVID-19, with significant disruptions to global supply chains and many people out of work overnight.

The economic strain imposed by the COVID-19 fallout is also likely to exacerbate the underlying cost-of-living pressures which had been affecting spending across a range of income groups before the crisis.

Retail and hospitality are some of the sectors most vulnerable to these conditions, due to their nature as customer-facing industries reliant on tourism and discretionary spending. Social-distancing measures have further limited the ability of many businesses in these industries to resume trading as normal.

While easing restrictions across some states have seen some people return to shopping centres, many retail stores continue to struggle under challenging conditions.

Temporary retail: harness resilience and creative potential

Increasing obsolescence of traditional retail, fast-tracked by changes in consumer behaviour and a contracting national economy, pose a significant threat to the health of Australia’s urban centres. But temporary uses can play a supporting role in economic revitalisation post-COVID-19.

Temporary use policy can provide a valuable mechanism for using vacant premises and countering cycles of economic of decline and dereliction throughout our urban centres. These strategies offer a low-cost means of regeneration in the absence of typical consumer demand or capacity for funding by governments. And because they rely primarily on human and creative rather than financial capital, temporary uses can endure a slow economic recovery or simply present an interim solution if the economy recoups quickly.

The main costs and risks to entry into these arrangements lie in brokering the use of premises and navigating complex legal and planning frameworks. These can pose significant barriers to would-be tenants who lack the financial capital and business experience to access space ordinarily. Government and partner organisations can play a crucial role in lowering these barriers by taking cues from successful programs in Australia and elsewhere.

SGS Economics and Planning creative retail popup

Revitalising retail: inspiring examples

Renew Newcastle

During the mid-2000s, Newcastle’s CBD reached the peak of a decline caused by the construction of suburban shopping centres and perpetuated by the closure of the city’s steelworks. The result was over 150 vacancies in former retail premises along the main street, and increasing stigma caused by crime and urban decay.

Despite the economic decline, the costs of entry posed by entering into formal leases were prohibitive to local enterprises, with owners seeking to retain the value of their properties in the belief that large-scale urban renewal would eventually occur. In reality, the market value of many of the buildings had fallen below the cost to their owners of using them.

Not-for-profit organisation Renew Newcastle stepped in to make these spaces temporarily available to artists and creative initiatives, brokering access to vacant properties. Once a retail space was identified, and the property owner agreed to participate, Renew Newcastle would seek cultural or creative local projects.

Rather than a traditional lease arrangement, they negotiated licence agreements comparable to leasing a billboard for advertising. These agreements were designed to operate on a rolling 30-day basis to ensure that property owners would still be able to keep premises on the market and to avoid the obligations, rights and costs of a standard lease.

Renew Newcastle held the liability and property insurance and the occupant covered the cost of any necessary refurbishment, as well as all ongoing usage costs such as water and electricity. This negated the bulk of costs imposed by traditional tenancies while lowering barriers to entry for projects and, crucially, eliminating the cost of failure.

During its years of operation between 2008 and 2017, the Renew program housed 230 local creative initiatives in 80 properties in Newcastle’s CBD, with 35 projects reaching a point of commercial viability and moving onto traditional leases. A formal cost-benefit analysis found that Renew Newcastle provided a cost-benefit ratio of 1:14.4.

Empty Shops Network

The Empty Shops Network, established in the UK in 2008, is a project that provides guidance and reduces barriers to local initiatives and community groups seeking to access temporary space.

In partnership with a local government authority, the Network helps develop temporary use programs and schemes within communities across the UK – from locating potential spaces and brokering agreements with landlords to sourcing community projects.

Often legal complexity presents an institutional barrier to entry for aspiring temporary-space-users. As such, one of the Network’s key roles is to ease the complexity of administrating such programs, providing free, open source documentation, planning guidance and how-to guides for potential project proponents.

The Empty Shops Network has enabled municipalities throughout the UK to capture the potential benefits of temporary uses, facilitating several ‘pop-up’ projects, and publishing an ‘empty shops toolkit’ to inform similar projects.

Meanwhile Space

Meanwhile Space is a London-based social initiative, set up as part of the Revitalising Town Centres Policy under the UK Government immediately following the Global Financial Crisis at the peak of economic recession in the UK.

Similar to Renew Newcastle, Meanwhile Space links spaces across the metropolitan area which have been vacant or under-utilised over long periods with start-up and development stage businesses in need of affordable space.

Under the Revitalising Town Centres Policy, temporary (or ‘meanwhile’) leases can be granted to tenants, which permit the use of a vacant business property temporarily, provided the landlord is looking for a long-term tenant.

Meanwhile Space acts as a property manager for participant landlords, sourcing and managing start-up, and acting as an intermediary between the landlord and tenant, similar to a real estate agent. Through this, the cultural and social value of an area is preserved while the economic setting remains unclear.

From its inception to 2017, the initiative supported more than 600 tenants in accessing affordable spaces across several London boroughs.

SGS Economics Planning Luke Nicholls
For further information contact:

Luke Nicholls

Principal & Partner

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