Savills : Future of outlet centres lies in hybrid offer & more urban locations

Outlet centres are increasingly on the agenda of shoppers, landlords and investors, according to a new report from Savills and Seven Dials, with hybrid offers and increasingly urban schemes providing key opportunities for future success. Retail Revolutions: The Evolution of the Outlet Centre states that average footfall has grown 10% at such schemes since 2012, while average spend has risen from £51 to £72.50 and the number of shoppers visiting between three and 11 times per year is up by 10%.

The report highlights growth in the typical size of UK outlet centres from 80,000 sq ft in 1995 to 140,000-200,000 sq ft in 2017, largely driven by an increasing leisure offer. Restaurant provision has doubled since 2011, now accounting for circa 8% of units at outlet centres across the board and upwards of 10% at many schemes. The provision of cafes and takeaways has also increased by over a third. At London Designer Outlet, 29% of units are occupied by cafes and restaurants while Ashford Designer Outlet's expansion will add six F&B brands. Landlords are also seeking to create other types of hybrid scheme, states the report, for example Hull's innovative Princes Quay development, the first in the UK to mix an outlet centre and full price high street offer.

While outlet centres have traditionally favoured out of town locations, the report highlights urbanisation as a key opportunity for future growth as shopper data suggests a more centrally located supply could increase market penetration. Less than 33% of outlet shoppers visit more than once a year but half of all consumers make a local shopping trip every week, making the case for locating closer to areas of high population density. Schemes such as Princes Quay in Hull and the planned designer outlet at The O2 Arena, Greenwich have begun to embrace this in recent years, capitalising on existing footfall by choosing locations served by public transport hubs or close to other retail and leisure locations.

Mickola Wilson, director at Seven Dials Fund Management, comments: 'Outlet centres are advantageous to landlords in multiple ways. They tend to offer turnover leases that, with active asset management, result in low average void rates of around 3% as well as financial benefits when retailers outperform expectations. For investors, this lease type allows performance to be closely monitored and often generates rental increases above the levels associated with conventional leases. There are suggestions that the sector is perhaps undervalued currently, but with its market value expected to grow by 35% to £3.8 billion over the next three years, outlet centres will become an increasingly attractive asset class.'

Tom Whittington, retail and leisure research director at Savills, adds: 'For consumers, the evolution of outlet centres means lines have already begun to blur with other types of shopping destination. Creating a fully hybrid offer that blends outlet with leisure, F&B and full price retail is the next step in attracting a wider range of visitors, increasing sales and ultimately turnover and profit. We see further scope for outlet centre development in more urban settings, working in harmony with other forms of retail and leisure.'