New retail and leisure entrants hungry for space as restrictions ease

The outlook for retail and food and beverage occupancy has been bleak in the face of numerous pandemic-driven insolvencies and store estate downsizings. However, a wave of new market entrants have given the retail, leisure and food and beverage sectors some hope that take-up will rebound in the near term. The diverse array of new players in London have included a “life-sized” Monopoly board game concept, which has signed for 22,000 sq ft at a former Paperchase store on Tottenham Court Road, W1, and celebrity aesthetic doctor Barbara Sturm, who opened her debut flagship in the capital on Mount Street, also W1, last month. On a bigger scale, the UK comeback of US burger chain Wendy’s includes a target of up to 400 new restaurants, while US fast-food peer Popeyes intends to open 350 nationwide. But is all of this appetite merely hot air, or is there promise for a tangible resurgence in retail, F&B and leisure take-up? Staying connected Where the quick-service restaurants are concerned, Lucy Chapman, strategic insight director at Kantar, said these have been the most resilient out-of-home dining operator types in the past year. Chapman highlighted year-on-year growth at these chains, with consumers wanting to stay connected to the sector on the back of delivery and take-away performances. She added: “There is an indication that people want to get back out there in hospitality, particularly among the younger age groups, which tend towards the fast-food restaurants and are keenest to re-engage. So there are opportunities for hospitality – as a society, anything that allows us to socialise, wherever that may be, is something we are looking for after the year we’ve had.” More broadly, occupiers are more motivated than usual to expand their bricks-and-mortar presences as retail begins to reopen, according to exclusive figures from Colliers International. Using London as a snapshot of demand, there were active requirements from 102 restaurant and retail brands based in nine different countries during April, 16 of which were new market entrants. Four of those seeking more locations in the capital are headquartered in the US, with a further two each from Australia and Finland. Food and beverage was the most prominent tenant type, with 37 prospective occupiers lodging requirements, followed by grocery (nine) and fashion (seven). The overall tally included seven pop-ups. Altogether these businesses sought 653,000 sq ft during the month, with an average size requirement of 6,405 sq ft. Before April, there were new requirements from 320 operators in the London market during the first quarter of the year, representing nearly 1.9m sq ft of space. This compares with pre-pandemic requirements from 265 occupiers in Q1 2019, and 180 during the same period in 2020. Balancing act The data does not necessarily translate into leasing activity, however. Paul Souber, co-head of UK and EMEA retail at Colliers, highlighted its role as a “barometer of confidence” that signals a widespread belief in a “strong” recovery for the capital. “There is obviously a balancing act, because landlords are keen to maintain or recover their rents while occupiers don’t want to pay what the landlords want, so there is still that bridge to cross – but what we’re seeing is that everyone is adopting a more sensible and flexible approach,” he said. “Once that happens, the market starts to turn.” He added: “I’m not saying this isn’t the toughest the retail market has ever been. But the shoots of recovery and levels of demand and enthusiasm are there, in a way that I haven’t seen for many years.” In terms of F&B, Souber said that new operators are leveraging from previous occupier fit-outs and infrastructure. More widely, structural changes in retail, leisure and F&B have produced “once-in-a-lifetime opportunities” for brands to secure locations in prime shopping areas such as the West End, on attractive lease terms in places they were either previously priced out of or which were in scarce supply. Souber is therefore sceptical that the grander statements of ambition from tenants aspiring to roll out hundreds of sites might end up “gone in a puff of smoke”. “This is the start of a new era in retail,” said Souber. “Retail space will shrink, but what’s left will diversify the street, bring a new energy and trade profitably because of less competition and the demand for experiences.” A tenant’s market David Baxendale, partner in the business restructuring services team at PwC, said it was “a good time to be a market entrant”. “Someone coming in afresh to a vacant property has the opportunity to renegotiate the lease and potentially make a success of that site,” he said. “In the main, it’s a tenant’s market.” Baxendale added: “Everyone associates the sector with doom and gloom, but there are plenty of businesses in the sector that have been able to ride it out and make use of the support measures in place. Some of those may well start to look to expand as well and exploit opportunities where they exist over the coming months.” Sarah Humphreys, lead partner for casual dining at Deloitte, similarly pointed to an element of opportunity for expansion that has arisen because of lower rent prices. “For global brands with the backing, that want to make a stamp on the market, now’s a good time – you can get some good deals,” she said. However, Humphreys questioned whether the F&B sector’s rising focus on health, and awareness regarding the links between obesity and fast food, make for an “unknown twist” in quick-service operator growth drives in the UK. Humphreys said: “You wonder, if the US is leading on that culture and it comes over here, whether there might be some caution in some parts or needs a twist in the brand to accommodate the more health-conscious younger generation.” To send feedback, e-mail pui-guan.man@eg.co.uk or tweet @PuiGuanM or @EGPropertyNews Photo: Pexels/Pixabay