Food & beverage dropping anchor in retail developments
It was certainly sunnier at MAPIC, the annual retail property developers exhibition, in southern France than it was in the UK this month but what remained the same across both places was the stunningly hot climate for food and beverage (F&B) in the retail environment.
Food & beverage was the main focus at the event this year and it has become such a big part of the retail mix at shopping centre and town centre developments that there is to be a dedicated MAPIC F&B event in Milan next year.
This is partly down to the rise of digital, which has been pushing an increasing amount of sales online, combined with a realisation that consumers desire richer experiences when they go out shopping that moves beyond them simply purchasing things to take home.
Nathalie Depetro, director of MAPIC, says developers have had to review their offers and this has pushed the growth of leisure inside malls. Her prediction is that F&B will reach 20% of square footage in malls by 2025 – from a current 6-7% within Europe.
Talk at MAPIC this year centred on the belief that F&B is becoming the new anchor for developments – replacing department stores. This is certainly the view of Jonathan Doughty, global head of foodservice at ECE: “Food has become the new anchor. A Five Guys burger outlet can draw in more people than a department store nowadays. These were the anchors but food is their replacement. It’s just that it has not been recognised yet by developers.”
This shift could certainly be painful as developers get their heads around this dynamic – especially as JLL calculates that as much as 45% of the GLA (gross leasable area) in malls in the US is given over to anchor department stores. In Europe this is around 30% and a lesser percentage in the UK.
Didier Souillat, CEO of Time Out Markets, whose food market in Lisbon had 3.1 million people visit last year and can have a peak of 17,000 people dining on a Saturday, is seeing evidence of the recognition by some developers that F&B has become the new kingpin.
“We are becoming an anchor. Landlords know what we can bring to a development. But we are 3,000 sq metres and so we are a big monster. It takes two to three years to get these things off the ground,” he says.
What Time Out Markets brings is flexibility with its food retailer tenants because Souillat knows that younger customers demand a constantly changing experience: “We do not lock in people in with five-to-10-year leases. We give one-year concessions. They can move on and we can bring in new ones to replace them if it does not work and we pay the capex on the unit.”
Ross Bailey, founder of Appear Here – the marketplace for linking empty units with tenants requiring short leases, agrees that flexibility will be the name of the game in the future: “Retail will inevitably be more flexible because that’s what customers want. Think of retail as a magazine. We want places to work the same way – to be relevant to that moment in time.”
Developers will inevitably have to view tenants and leases differently. “The security of brands on long-term leases does not mean as much today,” argues Bailey, adding that Old Street underground station site in London that hosts continuous pop-ups has 98% occupancy, with 500 years of demand, which makes the pop-up approach arguably “more secure than a 10-year lease from Superdry”.
“With this we have the data that these short leases are as valuable to a bank [funding a development] as long-term leases,” suggests Bailey.
Amid such fundamental changes the debate continues about how much F&B should be incorporated into shopping centre developments – whether it be pop-ups from smaller operators or longer tenancies from big brands.
Although Michel Reuvers, director of hospitality at McArthurGlen Group, says there is talk in the industry of 25-30% given over to F&B he believes this could be too much when considering the amount of restaurants that have been opening up on the high street and a growing number are starting to struggle under increased cost pressures and severe competition.
The focus at McArthurGlen is on handling the peak demand periods of F&B better – with 60% of such sales coming at lunchtime: “With only 10% of our space given over to food then no wonder there are some troubles. It’s all about peak handling, with good solid operations and efficient layouts.”
This is particularly important because F&B might account for only 10% of space at McArthurGlen, but Reuvers says 35% of the quality perception of its malls comes from food. It is also consumed by a hefty 60% of visitors.
Intu is certainly growing its F&B mix with 50,000 sq m leisure-led additions underway at its Intu Watford and Intu Lakeside properties. Watford involves a £130 m project that includes a Cineworld, and Hollywood Bowl, while Lakeside is undergoing a £74 m investment that includes 16,213 sq m of cafes, restaurants and leisure activities.
Dimitri Lalagos, senior Vice President of Triple Five in the US, has no such reservations about cranking up the F&B component either – as part of a broader focus on leisure – at its malls. “We previously had 17% assigned to entertainment at our malls but it’s changing. The big question is what real estate percentage to give to food and beverage? With department stores failing then food and beverage is a natural back-fill for that space,” he suggests.
Such is the commitment to leisure that Triple Five is constructing the American Dream development just outside New York City where 50% of its three million sq ft will be devoted to entertainment, which will includes F&B as well as an amusement park, Lego Discovery Centre, Sealife Centre, Kidzania and Dreamworks Water Park.
Whether or not we get this type of development in the UK remains to be seen, but things have changed for sure, according to Doughty who says: “Whereas previously a shopping mall might have had 300 shops and a few restaurants now it is about a more complex mix of different things. Developers are combining lots of different elements.”
Glynn Davis, editor of Retail Insider