The Future of... Retail Parks
Out of town retail parks are quite unique in that they haven’t really changed a huge amount since they were first established as a shopping concept in the 1980s. Much of the appeal continues to lie in the ability to visit multiple retailers in mostly large-scale (big-box) units all within one place and with ample, free car parking.
However as buying habits and tastes have evolved, it’s much harder for such a formulaic approach to retail design to adapt and so it’s no surprise that retail parks are also battling against the headwinds buffeting the retail sector more widely in the UK.
Retail park development has declined significantly since its peak over a decade ago, with the volume of new retail park completions falling 18% year on year in 2018. Investment in redeveloping or refurbishing retail parks is also down, resulting in many now looking tired, out of date and simply unappealing against more modern shopping centres.
None of this lends itself to prioritising customer experience and its difficult to see where retail parks go next if they can’t get a handle of this. If the proposition is for fast retail such as fashion, small electronics and supermarkets, then the competition is overwhelming. Most of these items can be bought online or in attractive mixed-use centres such as Westfield or Bluewater, where there is a curated experience and a constantly changing entertainment programme. So, the retail park has to work twice as hard to keep up, or like the rest of the retail sector, it has to change.
Despite much of the data suggesting that retail parks are getting smaller, a number of the most successful retail parks are actually looking at increasing their footprint to meet customer demand and accommodate more mixed-use outlets.
In terms of size, there are already eight retail parks in the UK that are over 500,000sq ft; this is up from a typical size of around 300,000sq ft, and this number is likely to grow. However, this growth and expansion will only work if a more innovative approach to retail planning is undertaken.
Much like the high street and shopping centres, the retail parks of the future will also need to stay relevant and become more of a destination for the whole family. This means having less retail space and more food and drink and leisure offerings. In this respect, the cost of out-of-town land and retail rents continue to be much cheaper than on the high street or in primary shopping centres so there’s a real commercial benefit for tenants to take up space in these parks.
Working harder for landlords
Retail parks also remain a sound commercial investment for landlords, despite the increased hold that online has at around 20% of the market. Many are currently under-rented from a cost perspective and so today, offer a very attractive opportunity for funds who are looking to buy portfolios of retail parks. They offer better margins and lower rents than most other retail propositions which all adds to the likelihood of a bright future.
Indeed, some retailers are concentrating their growth strategy solely on out of town big-box stores and are seeing very real, profitable benefits of doing so. Interestingly, there has been a real increase in food retail stores, such as Iceland and their Food Warehouse concept, taking up space in retail parks which is further expanding the mixed-use element of retail parks and adding to the kerb appeal for shoppers who can buy a kitchen, a dining set and then food to serve all in the same place.
Futureproofing the concept
Like much of the retail sector, tenants and landlords of retail parks need to survive today to be able to think about tomorrow but this isn’t something they can take their eye off. Despite positive shoots of future tenability, retail park planning must think about what is coming next.
A high draw for such parks has always been the ability to offer large-scale, free car parking and whilst that is likely to remain one of the USPs, it could also be a commercial liability in the future if innovations with autonomous cars and investment in public transport infrastructure start to make more of an impact. No longer required car parking space will require investment to redevelop, meaning costs that need to be recouped.
It also begs the question of whether, in the face of greater high street investment and online penetration, consumers will continue to choose a retail park as their shopping destination. There will always be more choice online and this is something big-box brands need to face into in their physical store offerings. Experiential shopping is still important – a consumer may have a shortlist of products they like but the ablity to touch and feel products such as sofas and beds is still important to many. It’s this type of experience that retail park tenants will need to focus on investing in to draw people through their doors.
Another option, though rather more drastic, is accepting the footprint of a retail park could be put to better use and changing it. This could be as distribution/storage space, as the sheer scope of available space lends itself to such a solution, or something far more left-field such as a hospital or educational campus. The surrounding infrastructure is all in place and it’s a unique opportunity to bring together disparate services into a single environment.
Brands within retail parks are no different to the wider sector in that they must continue to innovate and adapt to bring in new customers. Brand partnerships, leisure facilities, pop-up stores and glamourous showrooms are just some of what is going to be expected by customers as part of their shopping experience and so looking outside of retail to attract people in is going to be necessary.
However, with an increased focus on dining and leisure and the likelihood of many landlords working in collaboration with local authorities to house medical services, educational offerings and even libraries, the retail park will play a key role in the sector as we look to the future.
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