It’s not just shopping at a local store that’s seen as a sign of a burgeoning community, but also living above a shop. There’s been much talk in recent years about ‘the death of the high street’ and just as empty or boarded up shop fronts reflect badly on an area, empty flats above otherwise thriving stores seem to represent a missed opportunity.
With so many people and organisations in need of housing or space, why not bring them back into our towns? The Co-op Group, having recently launched a membership drive with a strong focus on community, often finds itself mentioned in these debates – with a large property portfolio and a property team based at its Angel Square headquarters in Manchester.
The property side of the Group is split into three groups. One large team looks after the trading estate while one small team is taking care of the nearby NOMA development.
The third team looks at non- trading properties – including flats above shops, or properties that have become surplus. Geoff Player, director of commercial and investment property at the Group, explains how the tenure of the property is what really dictates what can be done with it.
“If it’s a freehold […] by and large you’re able to do what you want with it,” he says. “If, however, it’s leasehold then a lease is a contract; and like any other contract there are terms and conditions.”
The lease might dictate what the building can be used for, or the level of rent that must be charged.
“Even if we wanted to give it away, the lease might prohibit us from doing so,” adds Mr Player. “The landlord might be of like mind… but they might not, and they can block you.”
People might look at a Co-op store and see an upper floor that looks vacant…but if it’s a leasehold property, firstly we might not lease the upper floor.
The Group has a large amount of residential property. This, too, can be split into categories. Some are ‘passive’. This means that technically the Group is the freeholder, but it might be an upper floor has been ‘sold off’ to a third party on a long-term lease (150 years, for example). The Group still has a responsibility for common areas, such as roof maintenance or drainage, but the Group no longer has any active role in the use or occupation of the space.
The other category is ‘active’ – there are approximately 800 of these across the UK, mostly flats. Tenants rent them on a short-term basis for a standard market rate.
“We have regionally based managing agents who deal with the daily face-to-face property management with tenants,” says Mr Player. “When the properties are left vacant, or need refurbishment, they refer back to us.”
The Group is not looking to acquire more of these residential properties; rather they are “a by-product of the operational portfolio”.“People might look at a Co-op store and see an upper floor that looks vacant,” says Mr Player. “There’s a natural assumption that it’s ours and it’s ours to play with, but if it’s a leasehold property, firstly we might not lease the upper floor. Most leasehold properties are held by third party organisations as property investments.”Landlords, except perhaps those of a particularly community-based mindset, are also unlikely to renovate upper floors into habitable flats if the bulk of the property’s value is in the ground floor.
“Secondly, there’s the freehold – leasehold split. There are question marks over cost, of whether we could do a conversion ourselves.
If it cost, for example, £100,000 to convert an upper floor redundant office for which there is no market in a small town…. You’ve got to get a return on that capital to begin with.”
Even if a lease allows renovation or conversion into housing, another issue is that of timing. A lease may have, say, three years left to run. The payback period on a conversion might be eight years. As Mr Player puts it: “There are so many factors that creep into what you can and can’t do.”
One way in which the Group has looked to increase its community impact with unused property is through the Community Property Scheme. This allows community groups and charities to use the properties for a fair, and sometimes nominal, rent. In return, tenants agree to keep the property occupied and in a good condition.
The Group is, says Mr Player, “really open” to suggestions from local people and groups about uses for their unused property. The scheme is aimed at locations which don’t attract commercial interest, but there is clearly benefit to be derived from their use, rather than remaining unoccupied.
If we can encourage early consideration of community solutions – seeing commercial disposal as plan B – a lot more could be achieved in terms of both social and economic value
Linda Wallace, chief executive of the CDS Co-operatives, well understands complexities of balancing business with social ambitions.
“Any company has to demonstrate that it’s using its assets to meet its purpose – social or otherwise,“ she says.
CDS provides assistance, advice and management support to housing co-operatives – including collecting rent, organising repairs and keeping financial records on the co-operative’s behalf.
“We want to see community-led solutions becoming a mainstream housing option for people across the UK. It’s up to organisations like us to make it easy for the Co-op Group and other big property owners to see how affordable housing can offer them real bottom line value – not just now but in the future. Our sector has some great examples and some really creative thinking about how this can be done – but to achieve the best outcomes we really need to be getting into a dialogue before assets are offered to the wider market.
“If we can encourage early consideration of community solutions – seeing commercial disposal as plan B – a lot more could be achieved in terms of both social and economic value.”
Ms Wallace believes it all comes down to opening up communication between all groups. “I worked in mainstream housing associations for a long time,” she says. “Local authorities had to show ‘best value’ and for a long time they thought this meant always looking to sell to private developers.
“Over time, we were able to demonstrate that we could achieve better overall value for money by working together at an early stage – securing social housing gain before developer profit rather than afterward. We think the same sort of benefits can be offered to business owners like the Co-op Group who need their employees to be able to live in homes they can afford.
“This will help them to achieve their wider social goals and loyal staff – as well as achieving a healthy return. But unless you present that point of view with the people looking after the properties…there’s no reason why people would have that way of looking at it.”
It’s not only the Co-op Group with residential property on its books, either. Lincolnshire Co-op, for example, currently has six homes listed for rent or to buy. Similarly, East of England Co-op has four. They both manage many more.
At the Group, Mr Player cites successes like an agreement with a community library in Shipley – closed by the local council but then rehoused, albeit temporarily, by the Co-op. Planning has also been passed for a former department store in Plymouth, sat empty on the edge of the town centre, to be renovated into student accommodation. He describes the legal battle for reuse and development as “a big, big unseen”, where emptiness isn’t necessarily through lack of endeavour.Co-operatives are run for mutual benefit – for members, workers, consumers or the community. There is, inevitably, a balance to be made.“Part of my job is to optimise the commercial benefit to the Group,” says Mr Player. “If the place is commercially lettable, then we get a commercial rent for it.
“There’s a balancing act between those properties that have commercial potential and we therefore need to extract commercial value from to mitigate the lease liabilities, and those where we can’t do that. We’re really open to communities coming forward and asking ‘Can we use it for this?’”
The question is how to recycle?” says Mr Player. “And moreover, who’s going to be the enabler?
The high street is an ever-evolving landscape full of places that could be termed ‘functionally obsolete’.
In the past, town councils would own the majority of the town centre and responsibility of development would fall to them. Now, ownership is more fragmented and councils are struggling for finance.
“The question is how to recycle?” says Mr Player. “And moreover, who’s going to be the enabler? Who’s going to step up to the mark and take ownership for co-ordinating the regeneration of these locations?”
- For more information on the Community Property Scheme and how to apply, go to www.co-operative.coop/estates/community-property