Regulated by RICS

While retail owners struggle with empty stores and falling values, fundamentals like their location still makes them appealing for savvy investors. Both city fringe sites and town centre units are increasingly catching the eye of developers with the intention of satisfying demand for all things logistics. So if you’re looking to convert your retail space into a logistics money-spinner, where do you start, and what key things do you need to consider to get it right?

A tale of two sectors

Research from the BRC reveals a high street vacancy rate of 12.3% in March 2020 (up from 12.1% in December 2019) – but with several major retailers falling into administration since lockdown began, the current figures are likely to be even higher. To add insult to injury, this all follows a year which saw millions of pounds pulled from funds holding retail property. As retail struggles, the industrial and logistics sector continues to go from strength to strength. Online demand, at the expense of bricks and mortar retail, is fuelling e-commerce’s growth and consequently the need for logistics hubs in the right areas where customers can receive deliveries as efficiently as possible. Amazon has recently shown a keen interest in last-mile, smaller-scale parcel distribution space providing access to high density city centre populations. The global impact of COVID-19 is only accelerating this demand.

Repurposing opportunities

Industrial assets have become just as lucrative an investment as retail sites, as rental values rise across the former with the latter going the other way.

Thankfully, there’s a branch of hope which many retail owners are now grabbing hold of: converting struggling retail assets into profitable logistics ones. But for those looking to take this step, there are several key things you need to consider in order to get it right.

Before you do anything, we’d recommend starting with a feasibility exercise to assess whether rental values are coming together for last mile logistics versus retail, as well as getting your due diligence done to establish the viability and cost to converting the space. An additional level of this costing phase is finding out whether there is any potential lease end dilapidations recoverability.

Another initial consideration is that repurposing schemes may require planning permission for a change of use, but with the Government advising Councils to have a level of flexibility with planning at present, now is as good a time as any to seek that permission.

Using drone surveying and digital data capture technology we then gather information including site plans, measured survey drawings and data to be embedded into 3D models to assist buyers with future modelling and planning.

A detailed review of the existing building services provisions is also needed to ensure they can still safely accommodate the new configuration, or if changes need to be made. For example, if you’re planning to roll out all-electric parcel delivery, your current power provisions might not accommodate that as they stand. Or if you’re subdividing your space, you might need to modify the toilet accommodation/welfare and drainage works to comply with building regulations. A review of the fire engineering strategy and statutory compliance due diligence would also need to be undertaken.

An analysis of the load capability of ground and upper floors is important too – will they be able to withstand the potential increased loading capacities of dense storage, or do they need to be reinforced? Perhaps you need to create access ramps and works to ensure a level floor for fork-lift trucks? This would require laser levelling surveys and potentially floor to ceiling height changes on ground and upper floors.

Whilst there’s a lot to think about when repurposing your retail asset to logistics space, the long-term lucrative benefits and direction of travel for these sectors make it worth considering. We cover all of the above technical appraisal and feasibility aspects in-house, with multi-skilled experts on hand to provide bespoke advice on all the key issues you need to consider to make your repositioning project a success.

For more information on how we can help convert your retail asset into logistics space, get in touch with Stuart Sword.