“Who’d be a retailer now?” That was the comment from City economist Jeremy Cook when the latest set of grim retail sales data was released by the Office for National Statistics last Friday. “The average Brit,” he added, “has spent the past few years living by the mantra ‘When the going gets tough, the tough go shopping.’”

After a grim December, many had been hoping for a bounceback, but the figures showed that consumers were not as hardy as they once were, said Cook, and the retail sector was facing a long-term, continuing slowdown.

Shoppers are being hit by declining real wages, record levels of consumer debt and the prospect of higher borrowing costs. But the wider problem is a structural shift in the way consumers spend their money. This is threatening famous retailers and forcing a rethink about how high streets will look in years to come, and what might be done with retail parks and malls when retailers shut up shop.

It is not just about shoppers preferring to buy online – although 20% of fashion sales, where the pressures are perhaps worst, have now moved to the internet. There’s been a seismic shift in the way we spend our time and money. Social media, leisure, travel, eating out, eating in – using takeaways and delivery services – and technology are all taking time and cash that would once have gone straight to shops.

In food, increasing numbers of people now prefer to buy local and often. Fewer big weekly shops mean out-of-town superstores are under pressure and the big supermarkets are trying to lure in other retailers to take space they no longer need.

This rapid change in shopping habits is boosting sales at the likes of Amazon, Asos and Boohoo, but forcing radical change on British towns and cities as physical retail space becomes redundant.

The past few months have seen a stream of collapses – from fashion store East to shoe chain Shoon and bed specialists Warren Evans and Feather & Black. Toys R Us is teetering on the brink of bankruptcy, while House of Fraser, Debenhams and New Look are all struggling, with all three considering large-scale closures of stores or space.

House of Fraser is struggling with heavy debts. Photograph: Linda Nylind/The Guardian

Independent retail analyst Richard Hyman reckons at least 20% of retail space will need to close over coming years as costs, including business rates and wages, rise while sales in physical stores continue to fall. “This is a slow burn,” he says. “Retailers have done all sorts of things to paper over the cracks, but what the markets need is for retail to get smaller.”

The challenge for high streets and other retail centres is highlighted by the fate of the former BHS estate. Nearly two years after the department store fell into administration, more than a third of its 160-odd stores lie empty, and about 30 have no tenants or development plans on the horizon.

There is grade A shopping London, Birmingham and Manchester where people will go for big stores and lots of choice Andy Lyon, retail analyst

Town centres and smaller shopping centres are particularly vulnerable, and an empty department store is the most difficult space to fill. Few retailers now want such large spaces.

Some former BHS outlets have been taken over by cut-price formats including Primark, Sports Direct, Wilko and Days – a new multi-brand concept set up retail entrepreneur Philip Day to put the retailers he now owns under one roof. But most former BHS shops have had to be broken up into smaller stores or turned over to new uses. One is now an art gallery; others are to be redeveloped into a bowling alley, a gym and a cinema.

Peter Mace of estate agent Cushman & Wakefield says any department store sites that come on the market in the capital will probably have to be broken up. “I am not aware of any requirements over 200,000 sq ft in central London,” he says.

He says fashion retailers are moving out of smaller towns and shopping centres but still looking for larger stores in prime locations. This suggests that while big retail centres still have pulling power, smaller stores are being replaced by internet sales.

Andy Lyon of Pricewaterhouse-Coopers agrees: “There is grade A shopping in places like London, Birmingham and Manchester where people will continue to head for a special occasion, when they want big stores and lots of choice. Everything else is struggling.”

Given what has happened in the US, where hundreds of department stores closed last year, British landlords and retailers are preparing to adapt. Shopping mall owner Hammerson took back a House of Fraser site at its Highcross centre in central Leicester last year. The top floor has become an extra car park, prime retail space is being taken over by Zara and the department store’s former service yard is now a street of restaurants.

Swingers crazy golf centre is to take over part of BHS’s Oxford Street site

“You need to understand your market, be creative and use lateral thinking,” says Peter Cooper, director of UK shopping centres for Hammerson. “There is an easy way that might involve spending lots of money, and a hard way that involves thinking on your feet.”

The former BHS store on London’s Oxford Street offers another glimpse of the future. It has been split three ways: between crazy golf operator Swingers; a market-style dining hall set to open this autumn; and cut-price Polish chain Reserved’s first UK store outlet.

With more and more shopping done online, Cooper says, malls and town centres need to provide experiences that can’t be enjoyed at home – from game centres, climbing walls and crazy golf to bars, pop-up markets and street food stalls. In the UK at present, less than 20% of shopping mall space is usually leisure or dining.

New retailers are emerging. On high streets among the fastest-growing are vape shops, hearing aid stores and ice-cream parlours. In shopping malls, some beauty, watch and other brands which once relied on department or specialist stores are also keen to have their own showcase. Both Microsoft and vacuum cleaner firm Dyson are planning stores on Oxford Street, following the example of Apple.

Some car brands, from Tesla to Mercedes, are also keen to take high street space. Fashion chain Next has recently signed a deal with the Rockar car dealership, which will take over part of its store in Manchester’s Arndale Centre next spring.

The demise of department stores and major chains may also free up space for less corporate operators. Shopping centres and high streets may have to offer short leases, pop-up spaces and market-style events to bring in smaller businesses that cater for younger people who demand more authentic local experiences – whether in food, fashion or beauty.

Cooper reckons former department stores might be replaced by pod hotels, live/work office space and other residential uses.

But major change can require major capital investment. And many high streets and smaller shopping centres will struggle to find the investment needed to survive. Lyon says some retail space clearly has no future. “Retailers, local government and landlords will need to work together: they’ll have to bite the bullet, flatten some space and utilise it for much-needed housing.”