Park life 2: the occupier view

This week we continue our review of retail parks from the perspective of occupiers.

Historically, retail parks appealed to occupiers because of their ease of access, larger and more standardised formats and typically lower occupational costs.

But will these factors continue to be the key drivers behind occupier's location choices?

Post-lockdown, we are likely to see the degree of polarisation between retail destinations accelerate. With online share increasing, physical spend will increasingly be committed at either best-in-class major destinations or local convenience-driven centres which - as well as serving the needs of in store shoppers - can be used to facilitate online sales and returns.

Retail parks are ideally placed to meet these occupier needs:

Costs and diminishing footfall in shopping centres
As we previously reported, retail parks proved more resilient, in terms of footfall, during 2020 than town centres and shopping centres. This was aided by the essential goods status of many occupiers and shopper perceptions of safer environments. If this trend continues, these factors are likely to accelerate occupier decisions to relocate to a retail park where they can access the same consumer, while paying significantly lower occupational costs.

Both M&S and Next have already carried out several such relocations. Next closed its store in Banbury town centre to relocate to a large format store on the new Banbury Gateway Shopping Park (seen above). It seems to be continuing a preference for retail park locations with a new 50,000 sq ft home store due to open soon at Bedford Interchange Shopping Park. M&S has closed a number of town and city centre stores (including Nottingham, Ravenhead, Banbury and Bicester) in favour of new, purpose built, out of town stores, allowing them to stock an extended product range and allowing better integration with its Click & Collect services.

Units size and format
Recent retailer failures mean that vacant space is increasing across the UK and Ireland, although as of mid-2020 the vacancy rates at retail parks was significantly lower than shopping centres and high streets.

Much of the vacant space in high streets and shopping centres is compromised, in terms of configuration, size or location. With fewer occupiers looking to take space, those that are active will be less accepting of sub-optimal space. Creating the ideal store (still a standard box format for the majority of occupiers) from these units will generally require investment, which landlords will seek to recoup over the term of the lease, contributing to higher rent. While there may be reconfiguration required at retail park locations, the format of units is generally more standard meaning a lower degree of investment required.

Increasing breadth of offer
While occupiers such as Next and TK Maxx will be drivers of footfall in their own right, they - and other brands - also benefit from `spin off' visits from consumers drawn to locations for other reasons. In this context, the increasing broadening of the offer at retail parks to include leisure and services provides a clear opportunity for additional sales.

Gyms have been a presence on retail parks for some time and while an extended active leisure offer is seen by some as the `saviour of the high street', occupiers such as Gravity and Ninja Warrior have significant space requirements, both in terms of overall space and floor to ceiling heights. Retail parks therefore generally provide a more cost effective solution than re-purposing redundant retail space in town centres. As an example of this, Ninja Warrior opened at Meadowhall Retail Park in September, in the former Toys R Us which has potential to attract a new demographic to the park, in turn creating opportunities for existing occupiers to increase their sales.

Consumer choice
As highlighted in the first of this series, retail parks have become increasingly popular with consumers and, as the market becomes increasingly polarised, this trend is likely to continue given their offer and convenience of access, compared to their high street and shopping centre competitors.

The popularity of retail parks for occupiers is likely to continue. Their ability to offer cheaper, better configured stores in a format with growing consumer relevance is a stark contrast to shopping centre locations, whose proposition of charging occupiers a premium to locate in proximity to a department store anchor is redundant.

Sam Fox