Will COVID-19 kill off the High Street as we know it?

The role of major town centres as places where people come together has changed, of course, and will take some time to come back. Just as COVID-19 will not spell the end of the office, neither will it be the death of retail or the town centre, argues Mark Leeson

With non-essential stores in England opening this week, much has been written on the immediate changes that shoppers will experience on the High Street or in town centres.  As with supermarkets, Perspex screens, floor markings, hand sanitisers and restrictions on numbers will become the norm.  But what are the longer-term changes in property design that could be expected? And – despite the huge queues seen on Monday when shops re-opened – will the pandemic really mean the end of the retail sector and the High Street as has been predicted, once this initial pent-up demand subsides? 

It's worth remembering that the High Street was facing crisis point even before coronavirus hit.  Thousands of jobs were lost last year as a raft of major retailers and restaurant groups collapsed – including household names like Mothercare and Jamie Oliver's restaurant group – as a result of factors like weak consumer spending and a shift to online shopping.

The rise of online retail has only been driven up further by the pandemic.  So it was clear that the property industry already needed to be thinking outside of the box in order to prosper. 

This means that brands need to find meaningful and memorable ways to attract, engage and retain customers. Successful retailers of the future will not see verticals such as physical and digital, they will instead focus on unified commerce; the ability to cross virtual and 'in real life' (IRL) platforms, allowing customers to flow between online and offline services with frictionless ease.

The way essential businesses, such as supermarkets, have adapted to the 'new normal' provides some clues to the future for the grocery sector.  Online shopping will remain a more regular habit (experts such as Mintel predict that the market will grow by a third this year), so the usuable space they have will change: they will need more space close to where customers live and work to put together same-day orders, so shop floors will reduce in size and backrooms and storage sections will get bigger.  Out of town warehouse space will also become more valuable.  Those stores with car parks will use them differently – car parking spaces will make way for more drive-through pick-up points.

Some locations that were looking fragile before are certainly looking even more at risk now.  As M&S chairman Archie Norman has said, major city or town centre stores will still benefit from customers who live nearby, as well as customers who work in offices (despite claims the pandemic will see the end of the office, it will still exist in some shape or form).  But centres that didn't have vibrancy before the pandemic are unlikely going to reclaim it now, so we could witness an associated fall in property values as major retailers pull out.

There is opportunity, though. One bright spot, borne from COVID-19, has been the rallying of support for local stores – and 63% of shoppers have noted that they want to continue supporting local business post-lockdown.  This could provide a lifeline for high streets and city centres to provide platforms for hyper-local businesses, which offer same-day services and stock that is dictated by local demographic data – akin to the model demonstrated by Target's smaller format stores, which have contributed an impressive $1billion in the past year.

There's also the customer experience to consider. Holders of assets will need to think of innovative ways to entice brands and footfall in our new normal, and this could be yielded from flexible lease models, creating versatile multifunctional spaces and using the local catchment to help define tenant mix, activations and events are just some of the changes that we are helping our clients to explore.

The safety element of store development will also change, with designers incorporating antibacterial fabrics and finishes, as opposed to more traditional materials—like copper, on which the virus can last for only 4 hours. More space will need to be utilised, too, and queues eliminated, by replacing centralized cash registers with sales assistants with tablets and phones.  The 'untact economy', such as touch-free and cash free retail will be big, and consumers will want to be reassured by having measures such as cleaning, overtly visible.  There will also be a focus towards air quality and monitoring systems.

The past few months have compelled brands to pivot their offer, and identify gaps in their market. Restaurants have become grocery stores (e.g. Leon), pubs have become delis, and B2B wine merchants have begun B2C on-demand. This has helped brands understand that they can, and must, create multiple streams of income; we expect to see pivoting continue in a bid to build business resilience.

In addition to virtual services, automation is being used for a variety of retail purposes, such as touchless services (e.g. robot delivery and coffee shops), helping to provide efficiency and peace of mind. We expect to see an acceleration of automation at various touchpoints of the retail cycle and it will become a key selling point, rather than a gimmick. In fact, automation may even be a key factor in surviving a post-COVID-19 recession.

In order to attract footfall, shopping centres need, more than ever, to become more 'experiential'.  This could mean fashion retailers may replace changing rooms with virtual reality screens in-store, where customers can see how an item will look on them without having to try it on.  There are dozens of tech companies – including the likes of Zugara, Magic Mirror, AstraFit and Fit Analytics – competing to provide a solution using AI, AR and VR.  Other stores that currently don't have in-house restaurants or cafes will also join the likes of John Lewis and M&S in providing such services for customers.

In our view, just as COVID-19 will not spell the end of the office, neither will it be the death of retail or the town centre.  In fact, more homeworking could provide a shot in the arm for some local High Streets.  The role of major town centres as places where people come together has changed, of course, and will take some time to come back. But it will, and, as shoppers diversify, again, in the future, they will be looking for retailers that offer not only a safe, but a unique, experience.