Matthew Reed, head of retail parks and retail solutions at British Land, the largest owner and operator of retail parks in the UK, reveals the latest trends in the sector and growth opportunities for retailers.
Although retail parks are not a new concept, their accessibility, larger-store formats and out-of-town locations made them even more popular during the pandemic. While the retail landscape today looks very different, largely driven by changing working patterns and shifting consumer priorities following the pandemic, this asset class is continuing to prove its mettle.
At British Land, sales are up 6% year-on-year during FY23 across our retail park portfolio, and our occupancy is at 99%, the highest in 12 years. Across the sector more broadly, retail parks are continuing to outperform, with retail park footfall up 2.2% year on year in September vs 1.4% year on year in high streets and 1.5% in shopping centres, according to Springboard’s latest data.
A key reason for this success lies in the adaptability of retail parks, with flexible space, ease of access and free car parking.
One of the biggest trends driving the sector at the moment is the rebalancing of physical and online retail, which has led to the increased adoption of in-store returns and click-and-collect hubs by retailers. These services are particularly well suited to retail parks where customers can benefit from free parking in easy to access locations.
For example, our New Mersey retail park just outside of Liverpool offers click and collect services across a significant number of units. These include JD Sport, H&M and Next, with the latter having long touted the benefits of omnichannel retail to reduce its cost base; indeed, Next fulfils nearly half of its online orders through its UK stores, alongside the majority of its returns, according to company data.
These types of services are particularly well suited to retail parks, as opposed to high street stores or shopping centres, because customers can often drop off or collect items as part of their regular shopping trips – for example, alongside collecting weekly groceries.
Secondly, with consumers becoming more conscious of spending habits amid a cost of living crisis, we’ve seen a rise in discount food stores looking to take space in retail parks. These types of stores are huge drivers of daily footfall – with customers tending to visit our retail parks once or twice each week.
This in turn creates a real halo effect across the sector, and we are now seeing other types of retailers actively looking for space near to these new anchor brands in an attempt to try to piggy back off this more regular footfall and increased spend. For example, last year, we completed on 85,000 sq ft of lettings with Aldi, for six new stores across four of our retail schemes in Denton in Greater Manchester, Walsall in West Midlands, Llandudno in north Wales, Woking in Surrey, Farnborough in Hampshire and Milton Keynes, in Buckinghamshire. Since signing this deal, we have noticed an uptick in demand and enquiries from fashion brands and higher-end food outlets in particular to occupy nearby space on these parks.
Another trend that we can see driving occupier activity is athleisurewear, with retail parks providing an optimum environment for a range of wellness focused services. The fashion retailers most synonymous with retail parks include JD Sports, Flannels and Sports Direct.
This one-stop-shop approach allows consumers to select their activewear, visit the gym and check out additional on-site services the retail park may have including an optician, dentist or private clinic all in one visit. This broadens the demographic of retail park customers and brings new shoppers onsite, creating a wash over effect for other fashion and food retailers.
The wider retail sector is not without its challenges. In addition to keeping up with shifting consumer attitudes – for example around sustainability and convenience – brands need to ensure they are taking space in the right types of retail locations to attract the footfall levels needed for successful trading.
In this regard, we believe that retail parks are the winning format for brands given their affordability, easily accessible locations and resilience to changing consumer behaviours – and they account for less than 10% of the UK’s total retail space. As we head into 2024, our outlook for retail parks remains optimistic: we believe there are many opportunities to drive value in this asset class and expect to see steady demand for this type of asset class – from investors and occupiers alike – in the years to come.
