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The transition towards leisure in retail parks: key findings and expert commentary

03 February 2017 by Nelia Vateva and Ashley Blake

Over the past five to ten years retail parks have experienced a significant transformation with regards to tenant mix and occupancy rates. This asset class has become a preferred destination not only for fashion retailers of the likes of Next and New Look but also restaurants such as Nando’s, McDonalds and KFC, all of which traditionally used to occupy high streets in town centres.

These changes have been driven by a combination of factors, from easy road access and free parking, to rent affordability, larger spaces and the ability to utilise these locations as click-and-collect centres.

Traditional occupiers

At LDC, we have a team of 45 field researchers who physically visit retail parks across the UK on a 6 or 12 monthly basis. 57% of the 1,192 surveyed parks have a presence of at least one leisure operator. Our findings show that fast food - takeaway (McDonalds, Burger King etc) is the leisure classification with the most units across retail parks - 536 in total. Landlords find them an efficient use of smaller units and tenants are attracted to retail parks as these locations provide access to high volumes of customers ‘on-the-go’.

Part of this growth has been driven by drive-thru operators. Such formats are easier to let as they don’t require the presence of leisure anchors or adjacent operators.

McD-2.jpgDrive thru McDonalds unit in Greenbridge Retail Park, Swindon. Source: LDC

It’s interesting to note that the top five leisure occupiers in retail parks by category are food and beverage operators (Table 1), and not traditional leisure such as cinemas and bowling alleys. The reason for this is because 'big-box' leisure tenants typically pay rents that are half what retail operators are required to pay and they also demand high levels of capital incentives due to their heavy fit-out costs. The cinema and bowling sectors are also relatively mature with few catchments not already served by existing units. However, such tenants often take up longer leases than retailers, providing landlords with a long term income.

Table 1 (Nelia BP).pngTable 1- Top five leisure occupier categories present in retail parks in January 2017 (Source: LDC)

Table 2 below clearly demonstrates that traditional non-food leisure operators have had little take up on new space in retail parks in the past 12 months. Tenpin’s growth is a result of taking over Bowlplex over the last 2 years.

Table 2 (Nelia BP).pngTable 2- Non F&B Occupiers within retail parks and % change over 12 months (Source: LDC)

Top F&B occupiers in retail parks

Table 3 below demonstrates that whilst the F&B offer is growing and some pro-active landlords such as British Land are challenging the traditional retail park status quo, this asset class is still unable to attract new and upcoming operators. The top 10 F&B occupiers represent a set of loyal retail park tenants who have been growing stock for the past few years.

Table 3 (Nelia BP).pngTable 3 -Top 10 F&B operators within retail parks (Source: LDC)

The reason up and coming retailers may shy away from retail parks is that most F&B operators only have a high street or shopping centre format and not a retail park or drive-thru concept. The lack of evening footfall is also a worry for potential occupiers and not all F&B operators will be attracted to a site just because it features a cinema.

The larger parks that have attracted a wide range of retailers, who have embraced the format of an out-of-town shopping centre have been most able to diversify their F&B offer.

Regional presence of leisure operators in retail parks

Across the 685 parks (with a presence of leisure occupiers), on average 19.1% of the units are occupied by leisure tenants. In comparison, the top 30 shopping centres have 18.0% leisure occupancy by units (Revo/LDC Index). The relatively small number of tenants on retail parks has enabled them to boost their leisure percentage.

The top four regions (East Midlands, Greater London, South & North West) have c.21% leisure in terms of unit numbers and the North East has the lowest with 15.3%, demonstrating a relatively similar presence of leisure in retail parks across the country.

Table 4 (Nelia BP).pngTable 4 -Top 10 Fastest growing leisure occupiers in retail parks in 12 months (Oct 2015 to Oct 2016) 
(Source: LDC)

From the top 10 fastest growing occupiers there are only three 'big-box' operators in this list – Pure Gym, Tenpin and Xercise4Less (Table 4). Arguably those occupiers find retail parks to be unaffordable in terms of rents and are focused on providing accessible locations with free parking for their clients. If rents keep falling in retail parks then we may see more big box operators moving in. Shopping centre owners are also seeking such clients and that could lead to competition to attract such brands.

Ashley Blake + Nelia pic 1-1.jpeg                          Xercise4Less unit in Newport Leisure Park (Source: Otium Real Estate Limited)

For example, in Newport, Stadium and Otium who own the main out-of-town retail and leisure parks had to face the opening of a new shopping centre in the city with a major leisure element. Despite this, Otium completed a successful regeneration of the park and let all of its void units to new leisure operators which attracted significant additional footfall.

Of note is the fact that the list is heavily represented by a mix of fast food pick up and pizza delivery operators. In the future could we see a further transition for retail parks featuring units serving as food delivery hubs run by operators like Deliveroo?

Table 5 (Nelia BP).pngTable 5 -Top five fastest growing leisure occupiers in retail parks in the last 12 months (Oct 2015 to Oct 2016)  -excluding overlaps with above table (Source: LDC)

Retail parks have significant advantages over city centres for many leisure operators with good road access and free parking. Affordable rents and lower service charges are also a major advantage. However, converting retail to leisure use can result in lower rents and requires major capital expenditure compared to letting to retailers. The number of F&B brands is also limited due to parks not being able to offer a high level of footfall throughout the evening.

Leisure operators seeking accessibility and those who require major space to offer declinational leisure, provide landlords with opportunities to diversify their retail park tenant-mix and add much needed longer leases to their investments.

If you require further information on retail parks please contact Nelia at or visit to arrange a demo.

Ashley Blake is CEO of Otium Real Estate - a business focused on investing in and managing commercial leisure properties such as leisure parks, cinemas, gyms, hotels and restaurants. Ashley is a chartered surveyor and was previously responsible for a £4bn retail and leisure portfolio leading the investment, asset management, property management, marketing, research and leasing functions at Land Securities.

Nelia Vateva is a Senior Relationship Manager at LDC leading on all client engagements in the property and finance sector. Nelia provides support to investors and asset managers in understanding changes in the fast moving retail and leisure sectors, tracking competitors, making investment decisions, due diligence and strategy setting.

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