Hammerson is repurposing part of a former department store in the UK into residential space in the wake of the collapse of Debenhams.

The retail-focused real estate investment trust (REIT) is to introduce a 300-bed build-to-rent scheme at the Highcross shopping centre in Leicester, after Debenhams closed many of its department stores around the country.

Shopping-centre owner Hammerson said it was working with private-rented-sector specialist Packaged Living to develop the plans ahead of submission of a planning application early next year.

An approval will enable the companies to transform part of the former department store into over 300 new homes with some amenities like co-working space. The retail frontage onto the mall at Highcross will be “retained and the space transformed into smaller and more flexible space for retail and leisure brands”, it said.

Hammerson said the repurposing was part of its strategy to reduce the amount of floor space occupied by challenged retail categories at its flagship destinations, particularly that occupied by department stores.

Mark Bourgeois, managing director UK and Ireland at Hammerson, said: “Today’s announcement is another example of the steps we are taking to manage the structural shift in retail whilst maintaining the vibrancy at our flagship destinations through a diversified offer and mix of uses.

“This exciting project will meet demand for rented accommodation in Leicester city centre and ensure Highcross remains an exciting destination for visitors, whilst supporting local businesses and boosting footfall.”

Recent research by the Urban Land Institute (ULI) showed that the COVID-19 pandemic has created further challenges for the retail property market in Europe but could help speed up a revamp of the sector.

According to ULI, the closure of many retail businesses “could pave the way for new and existing players to step in to buy, revitalise or repurpose those assets”.

Analysis by the Local Data Company on behalf of PwC showed that, despite closures in the retail sector, there had been low levels of repurposing activity due in part to the “hibernation” of the market this year.

“When the market reopens, the environment is set to accelerate repurposing trends as major retailers and landlords are now considering their options to overhaul retail space for commercial usage,” PwC said.

Mark Addley, real estate restructuring partner at PwC, said: “The shape of the high street has been changing, and the COVID-19 crisis is undoubtedly accelerating it. While we expect there to be more [company voluntary arrangements] in the coming months that will enable some tenants to remain in their existing locations, we also expect to see the shift towards mixed-use locations continue.

“We have already seen traditional office occupiers take on suburban high street space that is more affordable and practical – and we are now seeing this move into prime locations also.

“The prospect of leaving a flexible office and popping into a department store with a few floors devoted to a health centre, a cinema or a residential development is one that may have seemed completely alien previously. However, retailers are actively working with landlords to consider their options. Nothing is off the table.”

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