Schroders finds new uses for historic department stores
Dept W in Whitechapel London interior (refurbishment of Wickhams Department Store: courtesy SREF)
Department stores - often with historic facades and interiors - have been closing in significant numbers across UK high streets in the last year. This week it was announced that Debenhams has entered administration putting the future of the department store chain at risk.
However, as Future Cities Forum found out through talking to Jessica Berney, Fund Manager at Schroders Real Estate Fund, department stores can be re-utilised for different purposes, giving them a new life and purpose - and preserving the buildings for the future high street.
One of these is the old Wickhams department store in Whitechapel, East London which has been refurbished and re-let to Queen Mary University of London:
'We wanted the newly named Department W to appeal to the higher education and creative sectors, and to an operator who would just walk in and love the building. It's an amazing building and we worked with the fabric to ensure an unusual environment.'
Jessica runs SREF which is Schroders' biggest real estate fund with £2.4 billion invested currently across a mix of commercial buildings. The fund has 57 assets and these are spread between office, industrial, retail and 'other uses' that includes hotels and self-storage. The fund is measured quarterly against the MSCI global real estate index.
'These department buildings do lend themselves to different uses. People don't want to be stuck out on ring roads. The high street of the future will become much more of a mixed use hub and that is what makes a winning city. People want to live and work in same place. Our Bracknell Lexicon development has been a catalyst for regenerating the whole town centre. We are starting the second phase which is really bringing in mixed use into the centre, with living accommodation.
'At Department W (the renamed Wickhams building) in Mile End we did the development ourselves. In 2014 we made a letting to the Gym Group in the basement, and we instructed contractors to carry out the £11 million refurbishment for multi-let. We underwrite on alternative uses which gives us flexibility into the future. We made sure we got Fit Well Certificates which are part of a big sustainability in use initiative and also Wired Score Gold - this is a key aspect for being well connected and resilient.
'We are both multi-let and single-let focused, as we think that flexibility drives performance. We look to buy assets on the ground at the right price. Our main theme as a real estate investor is 'winning cities' and this is defined as cities where GDP growth is higher than the national average and where there is more than one core industry.
'There must be good and developing infrastructure and transport and also higher education provision. We want to avoid cities where one industry dominates, as oil has done historically in Aberdeen for instance. In the UK we want to focus on cities including Bristol, Reading, Milton Keynes, Manchester, Brighton, Oxford and Cambridge - where GDP growth is expected to be greater than the UK average.
'London we view as a collection of sub-markets - like Bloomsbury which has the University of Law, and Crossrail, and where the rents are slightly behind the West End and the City. What we are seeing is that tech and media companies are quite disruptive in the office market. These businesses have a competitive time attracting talent so they want cool amenities with flexible working spaces and improving infrastructure. These creative businesses are driving the occupier market and as an investor developer we have to reflect that.'