Barometer update – can the current growth strategies of the retail and leisure market be sustained?

Yesterday I attended the Completely Retail & Leisure Market Place in London. With over 1,000 delegates who are either retail or leisure occupiers, landlords, investors or agents then it is a very good sounding board for the aspirations and expectations of the market.

The main thrust of the occupiers that I listened to was one of growth.

The main thrust of the occupiers that I listened to was one of growth. Now this is great news but as this sentiment is so strong the other edge to the sword is the opportunity for rents to rise in what is a keenly contested market for space. As covered before, this ‘race for space’ is not in every location but certainly for new aspirational brands it is very much a keen focus. In the burger F&B sector Five Guys and Smashburger are two good examples and only yesterday Costa CEO Andy Harrison was talking of an 80% growth in Costa outlets. So we have new concepts entering the market more than ever before along with major brands looking to expand.

For many years people have identified an over supply of space. Many Americans who look at the UK market think again when they compare the volume of space to the number of people and the fragility of spend. Developers and landlords continue to build more space whether it be in Leeds, Bradford, Bicester Village or Rushden Lakes (the new scheme outside Northampton). Nearly every day the Local Data Research team report new developments up and down the country.

So is this growth in demand which also drives an increase in space sustainable?

Who would have forecast that we would be such a coffee nation ten years ago both in the home, on the road and in the shops? The major cities of the UK now have an amazing array of food concepts and brands form every corner of the world which reflects the internationalisation of places. Chicken feet, insects and snails are the only ones I have yet to see take off but perhaps give it time!

Over the years we have seen a number of large occupiers disappear from the high street from Woolworths and Phones4U to Tragus Group and La Tasca. So will we see the levels of distress accelerate as private equity/VC funding drives expansion to a point of oversupply? Also will outlets become unprofitable due to long leases and rising rents driven by all sorts of ‘weird and wonderful financing’?

When will we see the peak of this cycle? 2017, 2020? I am sure Warren Buffet would have a view if he looked into it!

In the meantime keep an eye out for the exciting new brands coming to a location near you – JaggedEdgeBarbers, Sugar Dumplin, Smashburger, Doddle, Carraig Donn, forexchange, Kitchen Table, wrapchic, rola wala and the light.

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