"Embracing the future of the high street by moving into commercial or semi-commercial (mixed use) spaces could present a real opportunity for investors looking to diversify their portfolio post-Covid-19."
The pandemic brought about a material change in the way people live, work, shop and eat: the shift to online shopping has accelerated and flexible working has become an enduring fixture, putting already struggling high streets under more pressure. Despite the message to “get out and spend”, footfall is lower than this time last year, and many shops have remained closed.
But empty shops could soon be given a new lease of life under the government’s expansion of permitted development rights. The new rules, which come into place from September, allow businesses and investors to convert vacant spaces into homes without planning permission. John Lewis is one such retailer exploring the idea of converting its closed stores into mixed-use affordable housing.
As this trend gains momentum, more retail units are likely to become used for residential purposes, and we could see some high streets evolve to become residential hubs, with a new breed of cafes, gyms and shops – boutiques and smaller food retailers – and a focus on community.
Embracing the future of the high street by moving into commercial or semi-commercial (mixed use) spaces could present a real opportunity for investors looking to diversify their portfolio post-Covid-19. For example, we could see more of a focus on creating residential living space, by way of HMOs or flats above retail spaces.
The new planning regulations will make things faster, clearer and simpler for investors, removing delays and any issues that may have previously created roadblocks. The government has set out to use permitted development as a way to navigate what would have been fairly challenging planning applications. However, it is important that investors are mindful of any changes to planning and infrastructure when considering this opportunity. A commercial or semi-commercial investment is markedly different to a residential investment and will appreciate more slowly. Equally, it also depreciates much faster, so demand is a key factor.
This is a specialist market for investors, and experience is key – as is making sure clients have access to the right lender. At Shawbrook we are seeing buy-to-let investors turning to commercial, and commercial landlords seek planning permission for flats above retail spaces in order to create a higher yield and return on investment. Specialist lenders often have a more tailored and seemingly complex product and criteria offering, so it is important that advisors understand the market and the options available. The specialist lending market will continue to grow and evolve as the high street does, which means the advisor community must also do the same.
