Department stores – an evolution

According to historical records, the first department store opened its doors back in 1796, at 89 Pall Mall in St James’s, London. Divided into several sections, it offered affluent shoppers a wide selection of items, ranging from furs to jewellery. At the time, it was a truly innovative concept, allowing consumers to browse freely and turning a rather functional activity into a popular pastime.

Fast forward to 2023, and department stores remain at the centre of our towns and cities, with some of them, such as London’s Harrods and Paris’s Galeries Lafayette having turned into landmarks in their own right. However, even some of the most iconic shopping destinations haven’t been immune to the technological changes that have disrupted the way we shop – namely, the rise of e-commerce, which has enabled millions of people to buy goods online, often helping save time and money, completely bypassing bricks-and-mortar retail. The cost of living crisis has made post-Covid rebounding a lot more challenging, with disposable incomes squeezed, putting even more pressure on retail operators across the country.

These changes haven’t gone unnoticed, prompting the likes of John Lewis to reconsider the use of its numerous premises, which has resulted in a decision to convert almost half of its Oxford Street shop space into offices. Retail-to-office conversions are fairly common (with Allsop’s London HQ located in a former Debenhams) due to the relative ease with which they can be achieved – open floor spaces land themselves well to being turned into open-plan offices, and wide ground floor entrance lobbies provide plenty of space for reception areas and cafes.

There are, however, other options that are looking increasingly attractive for developers and local councils which involve converting tired department stores into residential and mixed-use developments. With the UK continuing to experience an acute shortage of housing, councils have often been supportive of such initiatives, with some providing developers with additional incentives to get involved. Hull City Council, for example, offers grants of up to £750,000 to those creating jobs in the city through redevelopment.

Take a few of our own sales as examples. Allsop recently helped sell a former Debenhams in Worthing, which has since been submitted for planning to create 79 one and two-bedroom high-end flats overlooking the sea. Using its wide database of potential buyers eager to snap up such opportunities, Allsop sold the building for £2.8m, almost double the price a local estate agent had previously estimated.

The Plymouth Debenhams, also sold by Allsop on behalf of its leaseholder British Land, may be transformed into more than 160 flats and shops, with formal plans for redevelopment having been submitted at the end of 2022. As part of the transformation project, the outdated retail space at the upper levels of the building would be converted into residential accommodation, with the ground floor reserved for commercial uses. Identified in the Plymouth and South West Devon Joint Local Plan, and in the Plymouth Conservation Area Plan as an opportunity for re-use, this department store is an important heritage asset for the city, whose freehold is owned by the local council. Consequently, the council has been heavily involved in conversations considering its repositioning and has cooperated with the purchaser to ensure that a feasible scheme can be worked up to bring the high street back to life.

The Debenhams in Staines is another example of a recently sold department store whose buyer intends to pursue a residential use. Unlike in the two previous cases, on this occasion, the developer sought to demolish the original building to unlock space for a residential development, seeking to create over 200 apartments, which has met opposition from the council with an appeal having been submitted at the end of last year (although the appeal has now been successful).

A former Debenhams store in the heart of Worcester which has had plans for a four-storey artisan food hall (yet to open its doors) presents an alternative to retail-to-office and retail-to-residential conversions. If everything goes according to plan, this new retail destination could help bring life back to the high street and serve as a blueprint for future retail repositioning projects, which haven’t always been successful. Hammond of Hull, for example, a similar artisan food hall created on the premises of a former BHS store, unexpectedly closed its doors earlier this year, which shows that reimagined retail spaces don’t always get traction with the local consumer.

As the above examples show, there is no one size fits all approach when it comes to repositioning former department stores – developers’ options are determined by the area in question, the council’s role and interest in the project and, of course, the state and status of the building. In some locations, retail-to-office conversions would make more sense, while in commuter towns, where quality housing is often scarce and office stock aplenty, more residential development could be needed.

Sustainability is an increasingly important consideration for investors and developers, and many would prefer to repurpose existing buildings rather than demolishing them. But, in certain cases, a more flexible approach may be required in order to ensure town centres remain vibrant and continue to exert their gravitational pull – while the buildings that once housed department stores continue to be centrepieces for the town.

Given the councils’ increasingly active involvement and willingness to collaborate with the private sector, often through the provision of various incentives, now is a good time for investors and developers to take a closer look at department stores. Such projects can not only yield attractive returns but also achieve important social value objectives and revitalise entire communities – if handled sensitively.