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Is planning reform paving the way to a more dynamic high street?

The old Use Class Order created and reinforced divides between cities, the new reforms put cities on a level playing field.

Blog post published on 1 March 2022 by Anthony Breach

High streets in weaker urban economies faced difficulties before the pandemic, not just because of Amazon and online shopping. Their city centres had, and still have, far too much retail space, and not enough high-quality office space which can support the jobs that provide demand for those shops. Back in 2018, Centre for Cities found that just 18 per cent of commercial space in stronger city centres was retail, compared to 43 per cent in weaker city centres. Accordingly, the number of empty shops followed this pattern too. The high-street vacancy rate in stronger city centres in 2018 was 9 per cent, compared to 16 per cent in struggling city centres.

Shifting to “experiences” and food and leisure will not address these issues either. The economic challenge facing weaker city centres is a lack of production, but their commercial space is still too focused on consumption.

The new ‘E’ commercial use class makes high streets more flexible

However, recent reforms to the Use Class Order, which sets the rules for how buildings can be used and the process for switching between uses, may have already set the stage for big improvements to city centres.

As a previous Centre for Cities blog on these commercial property planning reforms explained, shops, offices, restaurants, and gyms, among other uses, were once all separate use classes. Switching between these uses required a journey through the planning process.

But this is no longer the case in England. The new ‘E’ commercial use class merges all of these city centre uses into a single use class. As commuters and customers return to city centres after the pandemic, occupiers and landlords can now use commercial buildings in entirely new ways and switch between uses without needing to go through the planning process. A related but separate change is the creation of new permitted development rights that allow developers to demolish commercial buildings or convert them into housing.

City centres are now mostly ‘E’ commercial

To understand how the new ‘E’ commercial use class will affect city centres, Centre for Cities has used Valuation Office Agency data to build a data tool that shows how the old and the new Use Class Orders have changed the composition of commercial property across all city centres in England:

The new Use Class Order data tool shows that while industrial, warehouse, and certain sui generis and community uses have remained separate and therefore protected, most commercial property in city centres is now in the same ‘E’ commercial use class. Crucially, while the old Use Class Order created and reinforced divides between cities, the reforms put cities on a level playing field.

For instance, consider Middlesbrough and Reading. Under the previous framework, 56 per cent of commercial space in Reading’s city centre was classified as office, compared to 28 per cent in Middlesbrough’s city centre.

But under the new Use Class Order, 93-94 per cent of each city centre’s space is now in the ‘E’ commercial use class. All of this space can be used for retail or office purposes. Instead of having to navigate a tricky and unpredictable process before they can begin to turn excess retail space into the office (or other) space that cities need, developers can just immediately get started and crack on. This will especially reduce development risks and costs in cities with weaker property markets, which is a good thing.

But prosperous cities will benefit too, especially those that have far too much retail in their city centre. For instance, retail previously made up 50 per cent of Oxford’s city centre commercial space. After seeing the largest increase in high street vacancy rates during the pandemic of any city, high street shops in Oxford are already being turned into life-science research laboratories.

Cities need to embrace economic change, and Class E makes that easier

Work still needs to be done to take full advantage of the new ‘E’ commercial use class.

Developers will need to bring much of this space up to modern standards, as it has been vacant for long periods. Some cities, such as Birmingham and Nottingham, also still have considerable amounts of industrial space in their city centres; local leaders will have to balance the needs of that activity with changing demand for city centre office space. Article 4 directions may need to be issued in highly productive city centres to prevent valuable commercial space from being turned into housing. And in the long term, demand for high-quality city centre space will be highest in the cities which are best able to provide what its commercial occupiers need: a large, highly skilled local labour market and good urban mobility.

While we don’t yet know what the full impact of the new ‘E’ commercial use class will be, it does mean that the city centre of the near-future has the potential to be a dynamic, high-occupancy place that flexibly combines spaces devoted to retail, office, and food and leisure – a place that could look very different from its recent past.

The lookup used to identify properties as ‘E’ class was created by Centre for Cities and can be found here. Comments and feedback are welcome.