The latest costar report details that 86% of department store space has shut since BHS collapsed in 2016. 79 stores remain of the 467 that existed 5 years ago after closure of BHS and Debenhams, and the right-sizing of John Lewis and House of Fraser. Of the 388 that have closed, 237 are still standing vacant with plans already underway for 52 of these.
A few weeks ago, I went to view the fabulous building that used to house Debenhams in Worthing. 45,000 sqft that went for just over £2mn. There were 73 people at the Allsop viewing day! A stunningly beautiful art deco building that was readily convertible into 40+ apartments right on the sea front with ground floor retail remaining.
The views of the coast and the south downs from the 6 penthouses that were possible would have made these units highly sellable. Sale price with help to buy at £300-325 psf, no need for parking (electric scooters fine), 42 x 1-2 bedroom units PLUS potential for £32 psf for 10,000 sqft food court on ground floor. Numbers stacked, but sadly we didn’t have enough time to get our bid together. Due to the interest, Allsop went to best bids 2 days after the viewing. I need to speed up our process.
Another high street that I have been doing a lot of work on recently is Portsmouth, where we are looking at buying a couple of buildings.
Why do we like Portsmouth? The city centre has been a zombieland since the opening of historic Gunwharf Quays but now sits on an inflexion point with the council approving much high rise student accommodation to bring residents back onto the high street. The large Debenhams remains vacant but the owners are looking at planning permission for a high rise residential development as next door plans for a 28 storey PBSA (589 beds) have been approved and next door to that the council are building a 20 storey apartment block (76 apartments).
So why all the excitement?
Remember my webinar on house price catalysts? One of the key influential factors is that geographical constraints to land availability cause sharp house price increases at demand inflexion points. Portsmouth is a prime example of this. Land supply is constrained by the sea on 3 sides and the estuary & A22 to the north, so the only way is up – rapidly increasing the value of land in periods of demand.
Keen observers of my theory on house price catalysts and inflexion points will note that Portsmouth psf values are on average £208 psf, similar to city centre Nottingham putting them both at the inflexion point between old stock and new build costs (we use a £200 psf estimate for new build). This witching point is something that gets us excited about house price growth over the subsequent decade. With strong economic catalysts and friendly local planners, larger developers come to play and land prices move significantly.
Portsmouth is firmly entrenched in the Solent Freeport zone boosting growth in manufacturing; and with cruise ships now docking at Historic Portsmouth (fabulous Gunwharf Quays and the naval dockyards) rather than Southampton; 24% of local employment is in the hospitality and leisure related industries. All this means there is simply not enough homes to support employment/population growth and with land constraints the only way is up.
The city centre rebuild is starting once again with students (like Nottingham!). Investment values on PBSA are as high as £300 psf. (I can talk through the economics of that another time). The council are keen to move the 24,000 students out of family homes in Fratton and into these PBSA city centre blocks. This brings natural footfall to the high street for both convenience and affordability.
And after that comes further development in offices, and other residential. See the town plan below of the city centre skyline in 2030.
Footfall on the city centre high street is also naturally improving and there has been a real post COVID surge of brands coming back into the empty space. Sports Direct just took a large unit in the Cascades shopping centre, which is nearly full now the old Marks & Spencer has been split up and leased to 3 fashion brand names. Haven health and Superdrug have also recently signed and are in refurb. This has caused a flurry of sales activity on the opposite side of commercial road with the old Arcadia owned unit also under offer (9,000 sqft for £575,000 – brilliant site that has huge potential for residential conversion).
Portsmouth was never the most glamorous place, but that is changing, and we forecast well above average house price growth for the next 10 years.
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