In a post-pandemic world, where convenience is key and people increasingly want access to essential services and facilities within their local communities, the needs of the retail property industry and medical service providers are suddenly becoming aligned, with the potential to solve one another’s challenges.
The rapidly evolving nature of the UK’s medical services provision means that over the course of the next few years approximately 13m sq ft of additional space will be needed to provide essential services. This is largely to facilitate the removal of outpatient and non-acute services from hospitals, placing them back into the community.
Under the spotlight of sustainability and a growing emphasis on the repurposing of existing properties, rather than building anew, already vacant retail units are now being seen as very viable and credible options to absorb this new requirement.
The transformation of large retail voids ticks many of the essential boxes for new medical facilities – namely the opportunity to address the net zero carbon agenda, their location right at the heart of communities, and the ease of access they offer via car parking and public transport links. The ability to free up existing hospital space also means the building of expensive, new hospitals can be avoided.
For retail property landlords, repurposing redundant retail space for medical uses not only provides long-term and secure income streams, but it also creates new, high-footfall anchors with the potential to breathe life back into town centres and support existing allied retailers, such as chemists, opticians, dentists.
The first exemplar projects under this new symbiotic tie-up are already springing into action, with former Debenhams department stores leading the charge. And there are clear reasons for this:
Many of these vast, empty anchor units have very limited alternative-use options. Often spanning 60,000-150,000 sq ft across 2-4 storeys, there tends to be scant retail demand unless the unit is broken up into smaller spaces.
Conversion into residential or office space is expensive and complicated due to the typical layout of department stores and the lack of natural light at the centre of the building.
The capital requirement to convert these units for leisure use is high, leaving landlords with little financial return. This renders this option only palatable for larger shopping centres where the new leisure tenant will enhance the overall scheme.
Many ex-Debenhams’ represent a hangover from the 2005-2010 shopping centre development boom, with their age meaning it is difficult to justify their demolition. Added to this, demotion within town centres is often a very complicated process.
First out of the blocks is expected to be the former Debenhams unit in Gloucester, which has been purchased by the University of Gloucester. The university is currently transforming the 215,000 sq ft space into lecture halls and training spaces to provide clinical education for nurses and healthcare workers, alongside patient-facing NHS services. It is anticipated that students will begin studying there by September 2023, providing an immediate injection of footfall into the heart of Gloucester city centre.
Following closely behind is the 64,500 sq ft former Debenhams unit in Carmarthen, Wales, which has been sold to Carmarthenshire County Council. MMX Retail advised Orchard Street Investment Management on this sale, which will see the prominent, yet redundant, retail building transformed into a new Carmarthen Hwb. Working with Hywel Dda University Health Board and the University of Wales Trinity Saint David, the Council will use Carmarthen Hwb to bring together a range of health, wellbeing, learning and cultural services right in the centre of town. In one fell swoop, this deal will help boost footfall at the town’s key shopping district, St Catherine’s Walk, and provide the local community with essential services easily accessible right on their doorstep. This new concept is expected to open to the public in spring 2024.
Elsewhere, the Debenhams unit in Folkestone has been earmarked for redevelopment into a new £16m state-of-the-art medical centre, after the site was bought by Folkestone & Hythe District Council in 2020. Separately, Halton Borough Council and Warrington and Halton Teaching Hospitals are also consulting on proposals to create a new Health Hub at Runcorn Shopping City, making it easier for patients to access key outpatient services. With the planning and development of these pioneering conversions already underway, the retail property industry will be watching with keen interest to see the results – not just for the transformed units themselves, but for the town centres as a whole. As many retailers brace themselves for the impending cost-of-living headwinds, and traditional high street stalwarts continue to right-size their portfolios in the face of rising online demand, medical uses now have the potential to provide a much-needed shot in the arm for UK town centres.
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