In the current market, commercial property landlord clients are very concerned with creating a unique identity for their schemes, and it is by using niche leisure and food and beverage operators that landlords are able to attract customers to new and existing developments. This counteracts online shopping (which with recent statistics only seems to be getting higher with the UK one of the highest users), increases spend and dwell time, and helps generate the great point of difference that every successful site needs.
The extent of eating, drinking and grazing facilities has increased dramatically in percentage terms within developments in recent years - leisure now often accounts for over 10 per cent of the space in many retail-led schemes (up from 2-3 per cent just a few years ago). From the West End’s many urban villages, to Europe’s largest urban shopping centres, from international airports and rail hubs, to listed and heritage sites across Britain, niche eating, drinking and grazing lettings allow landlords to secure the most vibrant and promising start-ups and independents, speciality food retailers and market traders, mobile operators and pop-ups. It is increasingly important these are married with the right development projects, not just the best known national and international brands.
The best example of this is at Westfield Stratford City, which opened on 13 September 2011 and was a task to bring together the best of London’s eclectic dining, securing 70 food and beverage lettings tailored to suit the scheme and its audience. Some of the food operators were invited to trial a different trading format of their existing operations, such as Chicago Rib Shack, which has adapted its Knightsbridge offering to form Baby Rib Shack, creating something unique for customers to experience at the centre.
The Great Eastern Market was the first food market to appear at any UK shopping centre, utilising Britain’s appetite for farmers markets and featuring an initial 16 food and delicatessen offers and a cookery demonstration kitchen adding to the sensory experience that embodies the ethos that food retail is a leisure pastime in itself. The Market also housed a retail scheme’s first boutique bowling alley – All Star Lanes – which helped make the leisure offering a draw in its own right. Bounce, the new ping pong concept from those behind All-Star bowling lanes, embraces another trend in the market currently.
Into the future, there could be more colonisation of roof space, for example external sports facilities such as a running track, or extreme sports such as rock climbing up the sides of developments. It is worth looking at the great fads on TV, such as DIY or gardening, at what might steer new leisure trends. Certainly cookery schools – as with Jamie Oliver’s new concept, Recipease, is another dominant trend in the market.
Pop-up leisure operators are bringing enormous benefits to the commercial property sector at the moment and landlords are engaging with them much more now as part of their general strategy. They are especially beneficial for landlords who have large holdings in a particular area, as they are a great way to trial new concepts and to see the reaction from consumers before committing to a permanent site. If it’s a vacant unit being used for a pop-up, it also takes away the empty rates liability and activates an otherwise bare shop-front. Similarly, if it’s an empty area of land (perhaps using the example of The Kerb in King’s Cross), it gives the land a use which it might not otherwise have had (particularly pertinent in the current market) and of course it also brings in some extra rent. Some landlords are now even deliberately keeping units back for the use of pop-ups.
Leisure is emotive, it always raises comment, drives huge PR and is a sure way of harnessing social networking as a means of raising awareness of landlords' holdings. The benefits of social networking that boutique leisure operators can provide can be of huge benefit to landlord’s schemes, which would amount to thousands upon thousands of pounds of standard advertising in some instances and not nearly as effective.
The potential pitfalls to consider are the strength of the covenants - landlords need to think carefully about how and where they can take risks. Too many landlords are still hooked on individual covenant status of operators as opposed to looking at the blended yield. And the reality is that if the landlord is creating an environment that has choice – often delivered by a range of boutique operational styles and cuisines - it’s likely to be an eating destination which has greater longevity. It’s also very important to recognise prevailing ethnicity and actively source boutique operators to suit, as well as understand what drives the impulse visit of the target audience. It is definitely a horses for courses approach – what works well at one scheme in one part of the country will be quite different at another.
It is also essential to review leasing methods for leisure food and beverage operators in order to keep the offer fresh. Shorter leases outside the act are a useful tool in order to keep the development’s leisure offer on trend and drive footfall, albeit this has to be weighed against the capex requirement of the ingoing operator. The use of pop-ups is now being embraced in a very positive manner by the London estate landlords, many of whom favour boutique operators and their amenity value to meet the requirements of monied workers and local residents. Here, boutique-style independent operators are the main driver of the value at these mixed use schemes over some of the retail values.
About the author
Tracey Mills is a director at Davis Coffer Lyons and is widely recognised as one of the leading authorities in the leisure property agency industry. She advises in both a consultancy and agency capacity on a wide range of projects both in the UK and globally. Specialising in leisure development consultancy from inception to completion, and increasingly the role of food retailing within retail and lifestyle schemes, Tracey advises on optimum tenant mix to create a vibrant trading environment, and unlocking and adding value from leisure development opportunities, particularly where clients have large property holdings.
She works for a wide range of clients on high–profile landmark sites as well as advising on unusual leisure space, such as former churches and theatres.
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