Eoin Feeney
Deputy Managing Director & Head of Retail Advisory BNP Paribas Real Estate Ireland
+353 (0) 1 661 1233

As we begin a new year with an optimism that we are approaching the final stages of an extraordinary period in all our lives, the challenges for many in the commercial sector will take longer to overcome. The retail and hospitality sectors have been most impacted across the globe as a result of the various restrictions imposed by Governments. Retail in particular had been undergoing a structural change before the pandemic, and so it will take lateral thinking and some brave decisions by all stakeholders to ensure that our high streets retain their vibrancy and remain relevant and appealing destinations.

The pace of change in retail was accelerated by the closure of non-essential retail stores, leading (unsurprisingly) to exponential growth in online sales. Reports indicate that 2020 saw online sales in the US accounting for 21% of all sales, up from 15% the previous year (Digital Commerce 360). ), while in Europe it is estimated that online sales grew by an average of 38% across the Eurozone, from a low of 22% in Germany to a high of 75% in Spain. (Statista).

Have the last 10 months fast-tracked changes that were inevitable or are they merely of a temporary nature brought upon by circumstance? The answer is probably somewhere in the middle, with shoppers appearing all too happy 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% of retail turnover in January/February of last year to a peak of 20% in April, before falling back to below 5% of turnover during the summer months.

In any event we see the greatest challenge to retail being the impact on the strength and depth of the occupier market, which lost so many brands in 2020 including established household names such as Debenhams, Mothercare, Oasis, Warehouse, Cath Kidston, Monsoon and TM Lewin. Unfortunately we expect further closures during 2021.

City centres have easily been the most impacted locations during this pandemic. Footfall has been decimated as shops shut for extended periods and office workers and overseas visitors have been absent. Vacancy rates have spiked and a big question is where will new occupiers come from? Radical thinking and decisions are required to reaffirm the city centre as a destination, which may be for shopping, service or leisure uses.

We face many of the same problems in this regard as our nearest neighbours. In England, effective from 1st September 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 faced the prospect of many months delay and work, along with the cost of planning application. Their system for all intents and purposes is similar to 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 3 months from the date of application. This does not include time required for an architect to prepare the application and does not include 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 around 6 months from start to finish.

While it is too early to gauge the real impact of the changes in England, should we in Ireland consider a review of our planning laws? Would a similar more agile approach with greater flexibility be good for the shopping streets across the 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 existing system does not provide.

The length of leases for commercial lettings has shortened considerably over the last two decades, something that is likely to continue over the next decade as the relationship between landlords and tenants becomes even more aligned. This will only result in occupiers and the use of a premises changing on a more regular basis.

Given the increase in vacancy we need the flexibility to implement changes in use quickly in order to get the premises occupied. 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. These entrepreneurs may not be familiar with the planning process and many are put off by it. This means units stay vacant for longer, new businesses do not open and jobs are not created. Every location will be appealing to different uses and reducing the complication in setting up a new business can surely be a major plus. If such occupiers were less limited in terms of options and planning constraints, they would be more likely to open, which can only be a positive addition to the shopping centre, town or city.

 

Eoin Feeney
Deputy Managing Director & Head of Retail Advisory BNP Paribas Real Estate Ireland
+353 (0) 1 661 1233