Spotlight:

Retail Revolutions

Retail Revolutions
The evolution of the outlet centre

20 November 2017, by Savills Research

The sector’s consumer and development trends

Introduction

Outlets have been in the market place now for almost two decades. They range from large covered shopping centres that can draw in international shoppers, to small independent and more local catchment based schemes. Yet historically they were predominantly located out-of-centre, with large car parks and a drive-to appeal.

 

Two key changes have occurred in the last decade. First, the offer in most schemes are no longer factory seconds or end of line products, secondly the outlet proposition has become increasingly leisure orientated, with more schemes being developed in central and urban locations.

The outlet centre market is small with only a few key operators and investors specialising in the market. However, an increase in development and investment activity, as well as several new formats appearing, means that a comprehensive commentary on the property perspectives of the sector is long overdue.

This report draws together the past, present and future consumer and development trends in the sector, and considers how the close relationship between retailer and landlord is resulting in performance growth that makes this an increasingly compelling market to invest in.

The terms Factory Outlets and Designer Outlets are both used to describe different scheme formats and FOC is an outdated term given the significance the outlet market plays in today’s retail space. For simplicity in this report we refer to all schemes as Outlet Centres (OCs).

 

 

Key highlights

■ The future of outlet centres (OCs) lies in a hybrid offer and more urban locations. With a multitude of new developments, extensions and investment transactions, there has arguably never been so much activity across the sector.

■ This reflects solid performance in an otherwise challenging retail market; since 2012, OC footfall is up 10%, average spend is up from £51 to £72.50 and frequency of visit has also increased.

■ The result is void rates of 3% and recent investment yields around 6.5%.

■ The typical size of OCs is now 140-200K sq ft, up from 80K sq ft in late 1990s. This increase is largely due to an increased leisure offer, with F&B provision doubling since 2011 to circa 8% of units, but accounting for as much as 29%.

■ Urbanisation is also a key opportunity for future growth of OCs, which have traditionally favoured out of town locations. Less than 33% of OC shoppers visit more than once a year but half of all shoppers make a local shopping trip every week. Several new developments are reaching new customers by locating closer to high population areas.

Articles from Spotlight: Retail Revolutions

Size and growth

20 November 2017

Size and growth

The sector continues to grow significantly

Visitation and spend

20 November 2017

Visitation and spend

Frequency of visit and average spend have increased in the last five years

Motivation and reason for visit

Outlets accommodate a variety of consumer needs

Top outlet brands

20 November 2017

Top outlet brands

The Value and Premium retail offer is less significant than you may think

The future is hybrid

20 November 2017

The future is hybrid

Significance of the relationship between retail and leisure trips in the outlet market

Urbanising the concept

20 November 2017

Urbanising the concept

Why are more outlet schemes seeking more central locations?

Examples of urban schemes

20 November 2017

Examples of urban schemes

There has been a shift away from the footprint of the typical out of town outlet scheme

Tenant performance, asset management and lease structures

Turnover rents benefit both retailer and landlord

Transaction activity and valuation challenges

The last 18 months has been busy one for the sector

Outlook

20 November 2017

Outlook

The UK outlet centre industry is set for further growth

 
 

Receive the latest research

Retail Properties

Key contacts

Tom Whittington

Tom Whittington

Director
Retail Research

Savills Manchester

+44 (0) 161 244 7779