Retail revolution: thinking outside the box

Can imaginative use of shipping containers help save our high streets? Jennifer Ayris and Erica Snellgrove investigate. There is currently huge interest in repurposing old shipping containers as commercial property. Cargo at Wapping Wharf in Bristol and BoxPark in London are examples of entire leisure developments created solely from converted steel containers. Recently, Sheffield City Council announced plans to build a permanent hub of cafés, shops, bars and restaurants out of recycled shipping containers in the middle of Fargate, one of its main shopping streets, as part of its regeneration of the city centre. Cheshire Oaks has also announced a new temporary summer “container village”, which promises to be packed with a range of street food, summer huts, a rooftop bar and live music.   The appeal of this type of scheme is twofold. First, it involves repurposing existing containers/materials that are no longer needed, so it’s good for both developers and consumers who have a strong environmental agenda and focus on sustainability. Second, this sort of unique development can generate hype and create an experiential shopping/leisure concept, which is considered key to reinvigorating bricks-and-mortar retailing and luring people away from online shopping.  Old shipping containers are like giant Lego bricks that can be used individually or blocked together. Individually, they are inherently small units and are the perfect size to attract independent retailers, pop-up shops and coffee huts. To make larger properties, suitable for bars and restaurants for example, they can easily and quickly be bolted together and configured/stacked to suit the space available. Making use of containers is significantly less expensive than building using traditional methods. They can be stacked off-site and transported easily, feeding through into lower upfront costs and cheaper rents, which is great for start-ups and existing businesses that want to try out a new concept. Some smaller developments don’t need foundations, so they can easily be moved and transported elsewhere, which is great if they are only intended to be a temporary installation. It also means they can be sited in public realm spaces and parks without disrupting existing businesses.  While it is easy to see the advantages of this type of development, what are the practical and legal considerations for anyone who wants to repurpose steel containers in this way?  Do you need planning permission?  Whether planning permission is required depends on whether the structure is considered temporary and the period it will be in situ. While using one container as a pop-up coffee outlet is likely to be considered temporary, more significant ventures, such as that proposed in Sheffield, are likely to be considered permanent. Therefore, planning permission will be required, even if the local authority supports the venture in principle. In addition to this, even if a structure is temporary, it may only remain in one place for up to 28 days per year under permitted development rights.  When making an application, there are some strong arguments in favour of this type of development: it can help to reinvigorate the high street, and the installation process causes minimal disruption. Planning permissions can also be used creatively here. Temporary permissions would allow time to test the water with a view to demonstrating that the development is both appropriate and investible. Planning permissions with seasonal operation are also relevant as these may appeal to businesses that already have permanent (bricks-and-mortar) premises but are interested in expanding with pop-up outlets for the summer months, such as the scheme at Cheshire Oaks. Can you secure funding from traditional banks?  It is possible to obtain funding for container developments, provided that the converted containers will be a permanent structure (ie will sit on a foundation and be connected to utilities). They must also be positioned on land owned by the borrower. The funding can cover the cost of both the land and the containers themselves. It will be more challenging to secure a lender for a container village than for a traditional bricks-and-mortar development, but some banks are prepared to lend against this emerging asset class.   How do you connect to services?  It is essential to establish where the nearest existing services are and how much it will cost to connect to those services. The location of existing services can be established by commissioning a suite of searches, followed by discussions with local utility providers regarding connection costs. Thought will also need to be given as to whether the route of any required service installation passes over any private land, which will require an easement or wayleave agreement with a private landowner. Can these installation costs be justified, especially if the installation is only temporary? [caption id="attachment_1139863" align="aligncenter" width="847"] Cargo at Wapping Wharf in Bristol[/caption] How do you get Building Regulations sign-off? Whether Building Regulations sign-off is required will depend on the size of the structure. Detached buildings which do not exceed 30 sq m and contain no sleeping accommodation are exempt. Therefore, small hubs of containers not bolted together would benefit from this, lowering start-up costs. For larger structures, Building Regulations sign-off is necessary and obtained in the same way as for more traditional builds by seeking approval from the local authority or an approved inspector. While, on the face of it, meeting some of the requirements, such as energy efficiency, may seem to be a challenge, converting these containers is now a well-established business, and many will be well versed in achieving this. Is it difficult to obtain insurance?  It can be challenging to find insurance for properties that don’t fit normal construction standards. An owner will need a bespoke policy, and insurers will consider security, fire safety, risk of injury to guests, bursting of pipes owing to lack of insulation and the weight of ice and snow on any flat roofs when setting the premium. The premiums may be more expensive to factor in these additional risks, so a scoping exercise to establish likely insurance costs should form part of the development appraisal.  How easy are converted shipping containers to repair and maintain?  The walls play an essential part in the container’s overall structure. By adapting them, cutting out windows and doors and bolting them together, do you lose the container’s structural integrity? Some shipping containers are decommissioned owing to structural damage or corrosion, so there can be a question mark over whether containers are a suitable building material for the long term unless undamaged ones are selected. Many businesses specialising in shipping container conversions will have the expertise to assess the suitability of individual containers and address any structural concerns relating to the design. As with any property, the fabric of the building will need to be maintained, but in the case of containers, this maintenance will be focused on preventing the corrosion of the steel.  Are running costs higher or lower?   Establishing the likely running costs before embarking on a container scheme is crucial. Steel has a high heat conductivity, meaning insulation of the interior will be required to stop it being too hot in the summer and too cold in the winter. Air conditioning and heating costs may be high depending on the outside ambient temperature. It remains to be seen if shipping container developments have all-year-round appeal or if they are better limited to the pop-up summer concept being trialled at Cheshire Oaks.  How easy are they to manage as schemes?  For larger schemes, this asset class will lend itself to being let out through multiple “easy in, easy out licences”. These are short-term arrangements that are time-intensive from a management point of view, with a high volume of tenant turnover required to keep the concept fresh and ever evolving. Proposed licencees are likely to be low covenant strength – start-ups and independent retailers – with a high possibility of tenants defaulting on the licence fees.  Playing a vital role Overall, repurposing shipping containers is an interesting and exciting concept, but not without (surmountable) difficulties. Their appeal is easy to see. They are becoming far more commonplace among the evolving street scene of our cities, playing their part in bringing consumers back to city centres for shopping and leisure purposes by creating an exciting and new vibe.  With a little more thinking outside the box, they could also be used for community services, such as libraries, scout huts, additional classrooms and food banks. We may also see an increase in the use of containers for residential development, allowing access to low-cost accommodation in the face of a severe lack of affordable housing supply.  Jennifer Ayris is a senior associate in the real estate team and Erica Snellgrove is a solicitor in the planning and environmental team at Irwin Mitchell Photos: Lead photo © Aron Yigin/Unsplash Cargo, Wapping Wharf, Bristol © Wapping Wharf