A new report from ULI Europe and JLL finds that food and beverage (F&B) and leisure offerings are essential to the success and future competitiveness of shopping centers. The report, Ingredients for Success: How Food, Drink, and Leisure Keep Shopping Centres Competitive, finds that retail sales in a sample of shopping centers analyzed for the study increased by 6.2 percent in the previous 12 months with the addition of leisure and F&B, with retail sales per square meter growing by 1.2 percent over the same period.
The report is informed by the financial analysis of eight shopping centers in Europe that had recently upgraded or extended their centers to include additional leisure and F&B. In addition, it draws on insights from interviews with industry experts on retail trends, as well as a survey of ULI Europe’s Retail and Entertainment Council members.
“While the move toward F&B and leisure began as a defense against e-commerce, these sectors are now essential to meeting the evolving needs of customers,” says Marije Braam-Mesken, chair of the ULI Europe Retail and Entertainment Council. “The shopping centers that made significant investments in these sectors have seen a halo effect, which is a first indication that F&B and leisure are contributing to overall performance.”
“Shopping centers are developing more and more into hubs that embrace the broader lifestyle needs of communities,” says ULI Europe Chief Executive Officer Lisette van Doorn. “This report gives an initial glimpse into the positive impact of these lifestyle elements on the success of shopping centers. We hope to undertake future research as shopping centers continue to evolve.”
Along with contributing to the uptick of retail sales in the shopping centers analyzed, leisure and F&B showed strong increases in estimated rental value (ERV) growth and minimum guaranteed rental (MGR) growth at 15.8 percent and 11.3 percent in the previous 12 months, respectively. These results point to the contributions that leisure and F&B make to overall performance.
Interviewees reported that valuers no longer differentiate the sector’s contribution to yield compared with retail uses in shopping centers.
Overall, survey respondents saw both leisure and F&B as positive in meeting the shopping centers’ softer targets such as increasing dwell time—the time a consumer spends in a center—and footfall. Footfall across the sample increased by 5 percent annually, a result that was viewed as positive against a general downward trend for the industry.
“We have witnessed for a number of years now the trend of increasing space dedicated to both F&B and leisure offers in shopping centers and how this reinforces place making and increases dwell time,” says Christian Luft, director in JLL’s valuation team. “Through this project, it has been possible to analyze data relating to shopping centers that have seen major F&B and leisure projects and to look at how this is impacting value.”
The report finds that F&B is perceived as an easier addition to shopping centers and more likely to contribute to a center’s wider goals than leisure offerings, which are considered more complicated and a greater risk for centers taking on larger units at lower rents. However, this perception varied across Europe, with southern Europe, central Europe, and Turkey depending on leisure as a main driver for centers.
The full report is available for download at http://europe.uli.org/ingredientsforsuccess.
Catherine Gregory is a strategic communications manager with ULI Europe.