The growing amount of space being allocated to F&B and leisure in shopping centres ties in with a structural shift which sees consumers increasingly valuing ‘experience’ over ‘stuff’.
When it opens in 2020, visitors to the Meydan One Mall in Dubai will enter what can best be described as a giant retail resort. So vast are its proportions and so diverse its offering that it far transcends the boundaries of a traditional shopping centre. In keeping with Dubai’s reputation for breaking records, the scheme, which was showcased at this year’s Mipim by developer Meydan Group, will be big and bold in every way.
Besides 620 retail shops (including two department stores and a luxury brands zone dubbed Grand
Canyon), more than 100 food and beverage outlets and a 20-screen cinema, it will feature 25,000 m2 of indoor sports facilities as well as a one-kilometre-long ski slope, a golf driving range, the world’s largest retractable roof and the world’s largest dancing fountain.
Meydan One may be an extreme example of experience-led retail, the trend which is currently sweeping the sector across the globe. But throughout the EMEA region, developers, investors and retailers are all in some way experimenting with strategies to entice and entertain shoppers in an age when their attention is increasingly being taken up by online media.
Closer to home in the UK, Westfield London is another leading exponent of experiential or destination retailing. Jointly owned by Australian developer Westfield and German fund manager Commerz Real, the mall recently became the largest shopping centre in Europe with the opening of the first phase of a 740,000 sq ft (69,000 m2) extension, taking its overall size to 242,000 m2.
CHAMPAGNE TASTING AND COOKING
Westfield London introduced a number of UK centre firsts when it opened in 2008, including the first luxury precinct, new hotel concierge services, an expanded dining offer as well as hosting international events and film premières. Shoppers can participate in events ranging from champagne tasting to 30-minute cooking sessions.
Besides a 21,000 m2 John Lewis department store, a key feature of the expansion is a dedicated outdoor events space called Westfield Square, offering dining, entertainment and ‘experience’ activities. Operators such as Japanese food hall Ichiba, bowling group All Star Lanes, Puttshack (the world’s first super-tech indoor mini-golf experience) and new restaurant and bar concept Maple are designed to add ‘vibrancy’ to the centre when they open in the course of 2018. Altogether, F&B and leisure take up 17% of the overall space at Westfield London.
The increased focus on ‘experience’ fits in with a broader global trend whereby time is becoming a more precious commodity for many consumers, particularly millennials, than ‘stuff’. Shopping centres, therefore, increasingly need to be destinations in their own right and offer an experience that goes beyond pure retailing.
According to research by JLL, the amount of space typically dedicated to F&B within existing properties in Europe has grown from 5% of total space a decade ago to 10-15% now and is forecast to reach 20% in some markets by 2025. Newly built destination properties, meanwhile, have up to 25% allocated to food – often brought together in so-called restaurant avenues – while in markets such as Turkey where eating out has a strong social function it can be as high as 30%.
‘The F&B sector is still evolving and different markets are moving at different speeds,’ says Colin Burnet, director of EMEA retail research at JLL and co-author of the
report ‘The Successful Integration of Food & Beverage Within Retail Real Estate’ published together with ICSC last year. In many markets, shopping centre landlords are still getting to grips with what for them is a new discipline, he notes. ‘What you generally see is that new centres are opening with a higher allocation of space to F&B than existing ones because it is easier to integrate it from scratch.’
Incorporating F&B into existing malls is much harder due to the more stringent technical requirements and the physical positioning of food operators to gain maximum benefit from customer flows. ‘It takes time to position F&B in existing centres, there are so many factors to take into account,’ adds Tjard Martinus, director of European retail research & consulting at JLL. ‘Is the centre open in the evening, is it accessible for food delivery services like Deliveroo, how do you manage the waste?’
The fast pace at which the F&B sector is evolving is reflected in the variety of formats on offer. JLL distinguishes between 10 different categories, from Refuel & Relax to All Day Dining.
PLACES TO INTERACT
In the central Dutch city of Utrecht, French REIT Klépierre is injecting a strong F&B and leisure component into the redevelopment of Hoog Catharijne shopping centre, one of the biggest in its portfolio and the Netherlands’ most frequently visited mall with more than 26 million visitors a year Located next to the country’s busiest railway station and a stone’s throw from a popular concert hall and cinema, Hoog Catharijne will provide a total 78,000 m2 of space when completed in 2019.
The focus on F&B and leisure is in line with Klépierre’s new corporate tag line ‘Shop. Meet. Connect’, launched in February, which positions malls as ‘lifestyle hubs’. In
Klepierre’s view, shopping centres should promote social ties as well as an experience of discovery, emotion and entertainment. ‘It’s about much more than just shopping,’ says Klépierre’s group head of leasing Louis Bonelli. ‘Malls are becoming “instagrammable” places.’
Shopping centre developers and landlords are jumping on the F&B and leisure bandwagon because of the spin-off effects; they see foodservice as a way of driving footfall and revenues when traditional retailing is under threat from e-commerce. Done well, says JLL, F&B boosts shopper traffic, dwell time, consumer spend and overall sales growth – the so-called halo effect. In mature markets such as Turkey and parts of the UK, F&B can even function as an anchor.
Mood Stockholm, a 10,000 m2 mall in the Swedish capital developed by AMF Fastigheter, is also a pioneer in the F&B domain. When it opened in March 2012, around 30% of the total space was occupied by foodservice operators. In Germany, a study of developer ECE’s domestic shopping centre portfolio conducted in 2016 found that 40% of visitors base their choice of shopping centre primarily on the available dining options – not on the variety of other stores. In addition, 60% of those surveyed eat at the centre nearly every time they visit.
Finding the right expertise to develop an F&B offering can be a challenge for shopping centre developers and landlords as they can no longer treat foodservice as an offshoot of retail. ‘It’s a very different discipline to traditional retailing with a different business model and there aren’t that many food experts out there,’ says JLL’s Burnet. ‘You have to think about aspects such as asset management, leasing, investment and valuation.’ For this reason, many landlords look to hire managers with a hospitality background, who are used to dealing with customers as ‘guests’.
Last year, ECE recruited Jonathan Doughty, previously head of EMEA foodservice consulting at JLL, to develop the gastronomy offering at its shopping centres. Prior to coming on board at ECE in the newly created role of global head of foodservice, Doughty spent three years working together with the German company to develop the Foodtopia concept at its MyZeil shopping centre in Frankfurt.
Comprising seven dining areas with different themes, Foodtopia is due to open in 2019 and will ‘change the perceptions and reality of the foodservice market’ in Germany, according to Doughty. ‘It is important to realise it isn’t a food court at all,’ he told PropertyEU in an interview. ‘We are creating a Town Square on the fourth floor of a shopping centre, with a range of cafes, bars and restaurants, a fantastic cinema and a really special place to be, any time of the day or night.’
Foodtopia is part of ECE’s ‘We Love Food’ strategy which aims to meet the growing consumer appetite for foodservice across the portfolio. Doughty, who built up over two decades of international food retailing experience before joining ECE, says that European shopping centres often lack a ‘proper integration’ of retail, leisure and foodservice elements. ‘These three components, like ingredients, need to be mixed carefully and that isn’t easy. Few purpose-built projects properly integrate these things.
There are a lot of extensions and redevelopments, so we need to make better “places for people”, then attract a broader base of operators in Europe.’ The food expert emphasises that retailing in today’s digitalised environment is about Emotion, Entertainment and Excitement. ‘I talk about the three E’s all the time, but they are so important. We can’t do ‘functional’ anymore and fortunately, the business agrees. We live in an “experience world”.’
The structural trends underpinning the shift to a larger F&B and leisure component in shopping centres mean the trend is here to stay, say experts. Macro factors like urbanisation and demographics, including millennials’ predilection for experience over ‘stuff’, will only increase, driving the need for shopping centres to be destinations
where people eat, socialise and are entertained.
However, as JLL warns in its report, more foodservice space does not necessarily equate to success. Just adding F&B is not enough; without a coherent strategy, it can even backfire. ‘Rather than being supportive of retail, a less-than-optimal offer can distract consumers and reduce the amount of time spent shopping overall.’
Oversupply of foodservice is a potential risk in some markets such as the UK where shopping centre landlords have used food as an answer to address rising vacancy levels or where the mix is not quite right. And the operators themselves may have pursued unsustainable business models. ‘The risk is that the overall strong growth of F&B in the past few years is pushing operators to the brink because of increasing competition and rising costs,’ warns Herman Kok, head of research at Meyer Bergman. ‘There’s a ceiling on what households are able to spend on dining out. And the impact on restaurant operators of growing online delivery platforms such as Deliveroo has still to be felt,’ he notes.
Despite these pressures, JLL’s Burnet and Martinus believe the general outlook for the F&B sector is bright. ‘The demand for eating out will continue, it’s become part of people’s routines,’ says Burnet. From a landlord’s point of view, F&B can even strengthen the ‘defensive quality’ of a shopping centre during an economic downturn, adds Martinus. ‘If you do it well, it can be a diversifier, a way of spreading risk.’