Food & Beverage: is F&B the vital component to the success of modern retail and leisure concepts?
The role of F&B in retail has changed dramatically. Historically an after-thought, it is now a vital component of any location trying to create a “sense of place” says David Legat.
5 minutes to read
Leisure is a catch-all term for what is actually a highly diverse sector. The array of pursuits that fall under the wider umbrella of leisure is both broad and expanding.
However, eating out is by far the largest and most conspicuous facet of the whole leisure market. Indeed, F&B is not only a standalone market in its own right, it is invariably a complementary component of virtually every leisure concept.
In many cases, it is where the leisure operators actually make their money, the main event itself largely being a device to pull people in.
No longer the poor relation to retail
For all its maturity as a concept, F&B continues to evolve at a fairly rapid pace. Recent history has seen increasing proportions of leisure, especially F&B, being integrated into retail schemes, both in-town and out-of town.
The number of casual dining restaurants in the UK has boomed in the last five years as consumers continue to embrace a huge variety of new, fun dining concepts.
Landlords are working hard to accommodate this demand; on existing shopping centres they are working to adapt outdated first generation space to meet modern requirements, while on new schemes developers are dedicating an ever increasing proportion of their floor space to leisure.
The historic “rule of thumb” was that F&B typically made up 6%-7% of floorspace in a shopping centre. However, this proportion has trended upwards in recent years, in some cases substantially so.
Westfield Stratford City raised the bar considerably when it opened, with around 17% of space dedicated to F&B and in excess of 70 dining options. Trinity Leeds originally proposed around 10% leisure floorspace – when the scheme finally opened in March 2013, this allocation had increased to 22%.
The narrative behind the higher space allocation to leisure is to increase dwell time and create “a sense of place”. But beneath the rhetoric, the net result of this higher proportion of leisure is often far more commercial – higher levels of customer spend.
While F&B may have been seen in the past as something of a space-filler and primarily a driver for the retail floorspace, it is increasingly a money-spinner its own right.
London vs the regions
While London does have the highest concentration of casual dining restaurants and also the highest growth rates in terms of new openings since 2012, this leisure focus is by no means confined to the capital and the rest of the UK is not far behind.
Brands on the whole still favour London as their training ground before branching out to the rest of the nation, perhaps as consumers are so faddy and always want to try the latest concept.
But the F&B market in Central London is facing something of a reality check in 2017.
On the back of the rates revaluation there is likely to be a significant (and imminent) rise in property costs, over and above the expected inflationary price rises and additional cost of both produce and staff.
Ongoing uncertainty around Brexit is not helping matters, with the fate of the skilled migrant workers, upon which the Central London restaurant scene relies, far from certain.
Against this uncertain backdrop, rents are already at record levels in Central London. Mayfair is £150/sq ft+ and Soho is reportedly not far off this level.
These record rents are bound to claim a few casualties, taking into account expected higher operational and occupancy costs, despite the transitional relief that some operators will benefit from when it comes to the rate increases.
In the face of a potentially over-heating market, we expect rents to plateau and operators to take a more considered approach in assessing the viability of opportunities when they present themselves.
As the capital becomes ever more saturated with operators, some restaurateurs are choosing to buck the trend and start up in regional cities.
One example is Mowgli, an Indian street food restaurant which started life in Liverpool and now has three restaurants open and trading all in the North West, with a small number of more on the horizon and no doubt a London debut will follow.
Those towns, cities and shopping centres which are undersupplied with casual dining are likely to see the largest levels of growth in new concepts over the next few years as restaurateurs try to exploit this undersupply and escape the highly competitive London market.
F&B: the ideal complement to other leisure activities
It is not just the scale of provision that has changed. The nature of F&B has also evolved considerably in recent years, particularly within shopping centres.
Over the years, leisure provision has come a long way from the traditional food courts, typically banished to the upper or lower reaches of schemes. The mix and type of leisure necessary to increase footfall is diversifying significantly.
In the majority of cases, a cinema is still seen at the anchor for a traditional leisure scheme.
In The Arndale Eastbourne Extension, for example, the preleasing of a 32,000 sq ft Cineworld provided the comfort to the casual dining brands that there would be day and evening leisure spend within the scheme, and so brands such as Carluccio’s, Wagamama, Nando’s, Ask and Byron all committed to the scheme.
Beyond the traditional cinema anchor, landlords are seeking other ways to differentiate the leisure offer.
We have seen concepts such as KidZania opening in Westfield London, and this tendency is spreading throughout the spectrum of the shopping centre hierarchy with soft play, trampolining, crazy golf and various other concepts being introduced to not only help enhance the shopper experience, but in many cases help to solve the problem of what might otherwise be empty spaces.
From space-filling, low rent after-thought to front of-house revenue-generating necessity, the rise of F&B within the retailing hierarchy has been significant. Its role as a bridgehead between the mainstream retail offer and destination leisure elements should also not be under-estimated.
David is a Partner in the Shopping Centre Leasing team acting for a range of institutional Shopping Centre & High Street landlords, retailers and leisure operators.
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