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Are retail spaces the next big thing for leisure and hospitality?

Author: Peter Johnson-Treherne, Group Finance Director, Heritage Great Britain

Published: 16 Aug 2021

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A trend over the last decade or more has been accelerated by the COVID-19 pandemic, the challenge to retailers in the high street and shopping centres versus the boom in online shopping.

The last few years alone have seen the demise of famous names such as Debenhams, Topman/Top Shop, TM Lewin, Oasis and Cath Kidston to name a few.

Up to 70 of the UK’s 700 shopping centres could be demolished or at least partly redeveloped into homes or other spaces and further at least 30 shopping centres in the UK are now at least half empty, including five that are more than 80 percent vacant. No doubt there are many more negative statistics which could be given.

An opportunity exists and is now starting to see progress in that these large indoor areas are being used for entertainment purposes – everything from indoor theme parks to unique visitor experiences.

Indeed, Landsec (UK’s biggest property company) believes around a quarter of retail space will be turned into something else. Whilst these conversions will see lower rent and sales, they will provide some level of security for the longer term together with the potential to sustain or increase footfall and dwell time at locations. The indirect impact is therefore a positive contributory factor.

Examples include:

  • Stockton-on Tees where the council has acquired two of the shopping centres and intends to convert one to an events and entertainment space; consolidating retailers into the other one.
  • London’s Oxford Street having a £150m make over to make it a greener space but also with the aim to encourage more non-retailers, bringing entertainment and activities
  • Conversion of Debenhams department store in Wandsworth to a £4m retailtainment hub by Gravity Active Entertainment

This is not just a UK issue – across in the USA, well-known brands such as Ralph Lauren and AT&T are working on experiential retail experiences and indeed in Las Vegas the new “Area15” complex is a mix of retail and entertainment including activities such as VR zone, arcades, zip lines etc, together with restaurants, galleries and retail. A consistent theme is these venues need to provide (retail) entertainment and immersive experiences.

Potential visitors want more than just retail shops - they want entertainment, activities, quality food and beverage offerings (including independents) and the opportunity to share immersive experiences.

The retail boom of the last 40 years has stagnated and indeed is in decline for physical shops, so landlords are looking for leisure and hospitality operators to develop and bring in new concepts that will reinvigorate the offering. The pandemic has accelerated this desire and indeed with the public now valuing safe social interaction and experiences more, then there is a real opportunity to drive retail forward but in a new direction.

*The views expressed are the author’s and not ICAEW