Retail parks have been on the back foot, but new names are now starting to freshen up their offers and draw footfall.
After 18 months of retailer collapses and retrenchment, retail parks have received a lift in the past month, with Asda announcing its ambitions to open a further 125 Asda Living stores in the next five years and Best Buy’s first UK store opening in Thurrock to acclaim.
But if every cloud has a silver lining, for retail park landlords it must be that the voids created have allowed them to bring greater diversity to their schemes where there is appropriate planning consent. So could the next year see even more variety coming to out-of-town retail?
Research from Trevor Wood Associates into retail park tenants shows that there was no movement in the ranking of the top players by space occupied in 2009 - B&Q, Homebase, Currys, Matalan, Carpetright and Comet. But, looking at tenants that grew their space most between 2008 and 2009, the names coming up are much less traditional. B&M Bargains, HobbyCraft, Smyths Toys, Home Bargains, Asda Living, Peacocks and New Look all recorded double-digit increases in the retail park space they occupied.
Andrew Collier, a partner at property consultant Cushman & Wakefield, says the value retailers are proving a draw, bringing shoppers onto retail parks, and landlords are happy to take them where they have the appropriate planning consent.
“Landlords want to talk to retailers like B&M Bargains,” Collier says, since footfall and tenant mix go hand-in-hand. He adds that Poundland also offers “tremendous footfall and phenomenal turnover” and that the value and discount retailers’ covenants are exceptionally good.
Asda has announced ambitions to grow its 24-store Asda Living portfolio, and Collier adds that the retailer brings real variety to a park. For the biggest tenants, which are a destination in their own right, this improved mix may not be so crucial. But, for the others in such schemes, the prospect of an Asda Living, Best Buy or John Lewis at Home should be positive.
Kingfisher group property director Ian Playford says: “Everyone is looking to maximise opportunities on retail parks. We are a destination, so we are happy if we are in the right location to drive our own footfall.”
However, he concedes that there are always sites that could trade better. And having other draws to a retail park doesn’t hurt.
Henderson Global Investors has found that demand for space at its 15 retail park schemes is picking up and that in some ways there is more demand than there is for high street or shopping centre space.
Henderson Global Investors senior portfolio manager Katherine Pye says that traditionally fashion-focused parks will remain fashion-focused, and rents have not really declined there, but value retailers have been able to move into the lower-end pitches that have opened up as a result of MFI and other such retailers vacating retail parks.
In addition to value retailers, Pye says that names such as HobbyCraft add an interesting dimension to a park. It is still not in that many locations and is set to be in store acquisition mode for another couple of years, bringing young families onto parks with their craft and gift offer. HobbyCraft grew its space on retail parks 31% between 2008 and 2009, according to the research.
Another retailer Pye says is gently moving into retail parks is Mamas & Papas. She says the retailer does a great fit-out and could have a further 10 to 15 retail park stores in the pipeline, which again bring first-time parents-to-be and young families onto retail parks.
On the fashion front, H&M has just taken an out-of-town store in York and there is a feeling that fashion retailers that want larger stores will increasingly have to look to retail parks for the space they want, as they will not find prime sites on high streets.
BNP Paribas Real Estate senior director and head of retail agency Ian Parish says that landlords are offering leading fashion brands turnover rents as the anchor tenant in some schemes to help the landlord attract other fashion retailers - a tactic that he says is working relatively well.
Collier adds that Peacocks is another retailer that has exceeded expectations with the quality of its retail park stores. He says: “People had thought it was dreary, but its modern stores are exciting, bright places for young people to shop.”
One of the original fashion retailers to enter retail parks before fashion retail reached critical mass there was Next. Its retail park space increased 8% between 2008 and 2009. It has 18 out-of-town Next Home stores and has plans to expand its Next Home format during its current financial year with 12 more stores, occupying 150,000 sq ft of trading space.
One major high street success story that is missing from retail parks is Primark. Collier says: “Primark has always said it is happy in town, but the pipeline will be harder to come by.”
Pye adds that it would be a really big coup to land Primark as the anchor tenant for a scheme, but it is unlikely to happen in the near future.
She says: “It has been quite anti-retail park in the past 18 months. I wouldn’t have thought Primark would pay great rents, so I can’t see it on a fashion park.”
The one factor that might dissuade landlords from taking on new retailers into retail parks is if their fingers have been burned by CVAs and store closure programmes. JJB Sports’ space on retail parks fell 45% - more than a million square feet - between 2008 and 2009.
But Parish would still encourage landlords to take on new and exciting retailers, even if there is a higher risk, because of the potential upside of what they can bring to a scheme. “JJB Sports, at its height, was a great operator to have in your scheme,” he says.
If landlords continue to take this optimistic view, then the diversity and consumer attraction to retail parks will continue to grow.
B&Q: Holding the top spot
B&Q has retained its leading position in Trevor Wood Associates’ research into the leading tenants on retail parks, even though the figures show that the retailer’s space on these schemes fell 6% between 2008 and 2009.
Kingfisher group property director Ian Playford disputes that the retailer has disposed of substantial space - equating to 440,000 sq ft - and says that, although the retailer is not expanding substantially, it does want to make the best use of the space it has.
“There is a lot of speculation,” he says but adds that it is better for B&Q to get new ideas into its existing stores.
Playford confirms that B&Q has not built a new large-format store since 2005, but says that the focus is on optimising the use of space within its current portfolio, rather than looking at new format opportunities.
There are, however, a handful of infill locations that B&Q has its sights on, and Playford admits that these are in major cities, mentioning London as an example.
BNP Paribas Real Estate senior director Ian Parish says that rent reductions in some schemes could allow B&Q to get smaller-format stores in schemes that have been too expensive for it to open larger stores in the past, such as in the Greater London area.