Foo dand beverage · of eating practices: a UK-Spain comparison. Southerton D., Díaz-Méndez,C.and...

Food andbeverageA solution forshopping centres?

Foreword

While this is still a significant part ofretailers strategy, with the adventof multichannel retailing there are nownumerous avenues open for retailers toexpand the top line. BCSC has highlightedthe evolution of the sector with publicationsfocusing on multichannel retailing and morerecently the degeneration of the highstreet. However the industry continues toevolve in a number of ways and the foodand leisure sector is no different.

With previous BCSC research focusing ontechnology and changing consumerattitudes, this report addresses the role offood and beverage (F&B) within shoppingcentres. F&B has become viewed by somewithin the sector as a possible solution tothe challenges of high vacancy rates. Bygiving ‘recession proof’ F&B operators moreunits, landlords can reduce empty spaceswithin their centres, mitigate rates chargesand increase rental income. The proportionof F&B units within shopping centres hasgrown exponentially in recent years andthe diversity of offers available toconsumers has strengthened the industry.Today new centres are being designedwith a greater focus and emphasis onF&B while existing centres are convertingformer pure retail units to F&B.

This report seeks to understand the truthsbehind F&B in centres and dispel some ofthe myths, while giving a clear overviewof the challenges within the industry.The demographics of each individual

area must be carefully considered andunderstood, and the overall proportion ofF&B to pure retail needs to be evaluated.Securing the value of an asset andproviding an attractive opportunity forinvestors cannot be achieved by simplyproviding a one-size-fits-all quota andexpecting it to drive value. This reportdiscusses these dynamic issues at hand.

If shopping centres are to remain the focalpoint within communities, then they must reflect the needs and wants of theconsumer. The statement by some that F&Bis close to recession proof may indicate an over reliance on this sector of theindustry, an option which should not beoverplayed. Through expert analysis andthe consultation with leading members of the F&B and retail property sectors thisreport is essential reading for anyone that seeks to understand the changing face of retail property.

Tom MeagerBCSC PresidentDirector of Property, Primark

The retail industry has been the subject ofsubstantial change in recent years. The currentstructure of the industry was unforeseen just a decade ago when the answer for greatersales was more floorspace.

Food and beverage:A solution for shopping centres?Researched and written by:Richard Barron, Aspect Market ResearchStephen Toal, Savills

Aspect Market Research54-56 Bridge StreetManchesterM3 3BW

SavillsBelvedere12 Booth StreetManchesterM2 4AW

BCSCCharter House13-15 Carteret StreetWestminsterLondonSW1H 9DJwww.bcsc.org.ukT: 0207 227 4480

ISBN: 978 1 897958 61 2© BCSC (British Council of Shopping Centres) 2014

DisclaimerThe text of this publication may not be reproduced nor may talks or lectures based on material contained within the document be given without thewritten consent of BCSC.

No responsibility for loss occasioned to any person acting or refraining from action as a result of the material included in this publication can be acceptedby the authors or the publishers.

Acknowledgements

BCSC wishes to thank members of the steering group for theirsupport throughout this research: Sarah Banfield, ICSC / Steve Belam,The Oracle, Reading / Padraig Carroll, BCSC / Edward Cooke,BCSC / Jonathan Doughty, Coverpoint Catering Consultancy /

Ken Higman, Coverpoint Catering Consultancy / Davinder Jhamat,BCSC / Deepan Khiroya, Land Securities / Serena Mills, JonesLang LaSalle / Chris Paterson, Aviva Investors / Thomas Rose,Cushman & Wakefield / Tim Walley, Bullring, Birmingham.

1 Introduction

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2 What do we meanby food andbeverage (F&B)?

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3 The relationshipbetween F&B and retail

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4 Current usage ofF&B in shoppingcentres

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5 Failure rates ofF&B operators

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6 F&B and the widerurban agenda

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7 The economicargument for F&B in shopping centres

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8 The impact ofF&B on retail

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9 F&B in smallercentres andsecondary locations

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10 F&B as part of the night timeeconomy

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11 The future of F&B in retail

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12 Appendices

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i) Case studiesii) List of contributorsiii) Bibliographyiv) Glossary of terms

Executive summaryPAGE 03

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Food and beverage: A solution for shopping centres?

Contents

1 QuickBite survey, Horizons, (July 2012).2 Behaviour change and the temporal ordering

of eating practices: a UK-Spain comparison.Southerton D., Díaz-Méndez,C.and Warde A.International Journal of the Sociology ofAgriculture and Food 19, no. 1(2012): 19-36.

3 Taste of the Nation report, Deloitte, (2012).4 Eating out is the new staying in, Marketing

Week, (19 December 2013).5 Compounded Annual Growth Rate (CAGR) is

a method used to provide a constant rate ofreturn over a particular time period.

6 Callcredit Information Group.7 The Town and Country Planning (Use Classes)

Order 1987 (as amended) puts uses of landand buildings into various categories knownas ‘Use Classes’. In broad terms class A1covers shops, retail warehouses, hairdressers,undertakers, travel agencies, post offices,pet shops, sandwich bars, showrooms,domestic hire shops, dry cleaners, funeraldirectors and internet cafes.

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Executive summary


In many cases, the impacts of increasingF&B are still to be fully appreciated and anumber of centres have indicated that it issimply too early to tell. Nevertheless, thereis evidence in this report to suggest thatadding F&B without a coherent strategy canlead to a less than optimal overall offerthat, rather than being supportive of retail,can distract consumers and reduce theamount of time spent shopping overall.

The opportunityConsumers are eating out more often thanin previous years1. In addition, mealtimesare no longer conventional or clearlydefined with people eating often andquickly throughout the day. According toThe Economist, a study2 comparing Britainand Spain found that approximately 40% ofSpaniards were eating at 2.50pm and about30% at 9.30pm. Conversely, at no point inthe day were as many as 20% of Britonseating. This behaviour presents anopportunity for F&B operators to be able tospread trade across the day from breakfast,through lunch and into the evening.

In terms of different types of F&B, coffeeand sandwich shops have the largest marketshare at 30% of the going out market3. Thefastest growing category was ‘fast casual’dining (sit-down dining with counter ratherthan at-table service). According tofigures4, the fast casual sector has seenvisits rise by 0.9% and sales increase by1.7% in the year ending 30 September 2013.In addition, since 2009 this sector has seena compound annual growth rate (CAGR)5 of2.1%. It appears that the mid-priced fastcasual sector is attracting cost-consciousdiners who want more than a ‘quickservice’/ ‘fast food’ experience.

In terms of demographics, young adults eatout most frequently. 2013 data shows that75% of those aged 18-24 and 76% of 25-34year olds had eaten out in the past twoweeks. This compared to an average of 67%of all adults. In addition, spend per meal had

increased from £12.30 to £13.30. In terms ofthe type of F&B categories, about a fifth offast casual diners are under 24 years old,attracted by the informal atmosphere andkeen to achieve value for money.

F&B space withinshopping centresAnalysis of floorspace data6 indicates that8% of units within shopping centres areallocated to F&B usage. This proportion ofspace for F&B rises in larger destinationcentres to around 15%. When Savills’managed portfolio is analysed, the totalnet floorspace being analysed came to 16.7 million sqft. Of this, 1.38 million sqftwas apportioned to F&B — again 8% of thetotal. There has been a significant amountof reconfiguration from retail to F&B use incentres in recent years. Conversion fromA17 to F&B usage in 2009 stood at just over700,000 sqft; however this increased to apeak of just under 3 million sqft in 2011dropping to 1.7 million sqft in 2012.

Failure rates for F&B operatorsIn terms of failure rates for F&B operators,those incorporated in 2010 were more thantwice as likely to have failed in the firstyear compared with those incorporated in2008 — and even more likely to fail in 2012.The credit crunch was at its height in2010 which led to a dramatic slowdown inconsumer spending. In addition, theeconomic downturn allowed a number offledgling businesses to emerge and thiswill have led to a more competitiveenvironment in recent times along with anincrease in the likelihood of new companiesfailing within the first couple of years.

Dwell time and F&BThe inclusion of F&B in centres is oftenjustified by the belief that it leads toincreased dwell time and therefore growingconsumer retail spend. Analysis of dwelltime data (provided by Path Intelligence)

40%Approximately 40% ofSpaniards were eatingat 2.50pm and about30% at 9.30pm.Conversely, at no pointin the day were asmany as 20% ofBritons eating.

There appears to have been something of a rush towards increasing food and beverage(F&B) spaces within centres in recent yearsand many within the industry appear to view F&B as a major opportunity.

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8 Based on analysis of consumer tracking dataprovided by Path Intelligence.

F&B can add to the overall centreexperience and can serve as a ‘placesetter’— creating an enjoyable spacewhere people want to spend their time.It just needs better integration.

challenges this assumption. F&B mayincrease total dwell time however it doesnot directly impact on dwell in retail units.Indeed, the research has been able toidentify that including the wrong typeof F&B can actually have a detrimentaleffect on the amount of time visitorsspend in retail outlets8.

The report establishes (from the PathIntelligence data) that between 15% and45% of centre visitors use F&B outlets (ofall types). However, there is a substitutioneffect among some F&B customers, somepeople eating in shopping centres tend toreplace visiting a retailer with a foodservice outlet — diners shop less than theoverall average based on dwell time.

This substitution effect is more pronouncedwith a more sophisticated F&B offer thatincludes at-table service restaurants. Thistype of F&B outlet increases overall dwelltime in the centre only because the diningoccasion takes more time. Diners mayspend additional time in centres overall,however longer dwell time does not meanthey are always spending this additionaltime in retailers.

Selection of F&B operators —getting the mix rightThe selection of F&B offer must always takeinto account visitor demographics, shoppingoccasion and the competitive F&B in thelocality. Regional destination centres willhave greater scope for a variety of F&Bformats. Shopping centres based in theheart of cities may struggle to compete ifthere is a well-established F&B offer in thecity centre itself, especially outside of coreretail trading times. Equally, city basedcentres such as Cabot Circus, Trinity Leedsand The Oracle in Reading have flourished inan environment where the pre-existing F&Boffer was relatively weak. Schemes withconvenience-led shopping tend towards

shorter dwell times and lower spend asshoppers often have a more targetedbudget. Consequently, the F&B offers withinthese locations are more likely to be of a coffee shop / quick service nature.

F&B from a regional perspectiveThere are a number of food concepts thathave developed and succeeded on aregional basis and there seem to be fewbarriers to concepts moving arounddifferent areas of the country.

The exception to this is London which isquite different to the rest of the UK.London has a very unique population witha variety of cultural and ethnic diversity.This creates a demand for an equally widerange of food service offers. London seesgreater levels of socialising after work,leading to some blurring between eatingout occasions and the average working day.

The F&B landscape outside the capital isvery different. As in retail, a concept that issuccessful in London is not guaranteed togain traction and acceptance elsewhere inthe UK. The demographics of any given areamust be carefully considered beforetargeting new markets; the UK is a nationwith unique regional diversity. Localbusinesses that operate without a presencein London are not unsuccessful — businessmust think locally and ensure they areservicing local needs. F&B conceptsdeveloped on a regional basis may enterthe London market successfully, howeverthis is not always the case. The key point isthat operators should take these regionaldifferences in behaviour and thecompetitive context into account.

The economics of foodserviceThe foodservice and retail business modelsdiffer fundamentally. It is physically impossibleto eat all day long whereas shopping cantake place in multiple retail outlets over a

75%2013 data showsthat 75% of thoseaged 18-24 and76% of 25-34 yearolds had eaten out in the past two weeks.

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prolonged time period. Once the relativelyhigh costs of fit out for F&B units are factoredin it is easy to see why most F&B will struggleto match the potential rental income of asimilar A1 retail space. Consequently, themajority of F&B operators will not be ableto match the level of A1 rents.

While A3 (F&B) rents may be lower, shifting toA3 usage does not always result in a loweringof an asset’s value. It can impose short termcosts when reconfiguration of space isrequired however these can be offset by thestability of longer leases and better yields(although a note of caution is raised on leaseduration in the following section).

Length of leasesThe capital expenditure by F&B operatorswhen they open a new outlet is highcompared with retail. F&B companies wantto depreciate their investment over a longerperiod of time. Therefore, they are oftenlooking to sign long leases of 15, 20 or even25 years. Presently, many landlords arewilling to offer these terms. However,landlords need to be confident that thosefood service brands have sufficient visionand flexibility to develop and meet changingconsumer needs over the term of the lease.

The branded restaurant market (multipleoutlets using the same format) is predictedto grow from £16.4 billion in 2013 to £22billion in 20189, accounting for 43% of theeating out market by value in 2018. This mayreduce the diversity and choice of operatorsthat a centre can attract.

Long term commitment to larger scalebranded restaurant operators may unbalancethe business relationship in favour of theF&B businesses. Ensuring a good mix ofbranded and smaller independent operatorstogether with carefully structured leaseterms could become increasingly important.

Future space for F&BFor larger schemes, there must be abalance between retail, F&B and leisure —all have a part to play and can be mutuallysupportive. Given this, based on currentindustry opinion and combined withdevelopment pipeline analysis10, it seemsunlikely F&B will increase beyond anaverage of 15-20% of floorspace in largercentres, albeit this is a level that wouldnot have been considered viable 10 years

ago. In addition, with recent legislationintroduced whereby planning permission isnot required for change of use from A1 toA3 for the first two years, this may helpkeep F&B floorspace at a significant level.

Foodservice and the evening / night-time economyA leisure offer, typically a cinema, isrequired if a centre wishes to attractvisitors well into the evening and night-time. Overall, F&B has limited potential toregenerate night-time economies through apresence in shopping centres, particularlywhen the leisure element is absent. Indeedmany retailers consulted believed thatincreased operating costs with lateropening, to complement a F&B/ leisureoffer, outweighed the benefits in eitherfootfall or sales.

Integration and managementof F&B within shopping centresThe analysis points towards a need forbetter integration of F&B into centres’overall offer. F&B can add to the overallcentre experience and can serve as a‘place setter’ — creating an enjoyablespace where people want to spend theirtime. Given that visitors are alreadyspending their time within centres, theremust be an opportunity for better cross-promotion between retail and F&B.

There are indications that F&B needs better integration within the overall centreproposition and its strategic management.Landlords are bringing expertise in-house by recruiting people with foodservicebackgrounds. However, these new recruitsmay have relatively little experience ofretail, creating the risk that F&B becomesan isolated business unit. This highlights theneed for a multi-disciplinary approach whenmanaging and developing the F&B offer. It should not be considered in isolation.

The overall question posed in the title of thisreport: ‘Is food and beverage a solution?’seeks to address whether F&B can reduce thenumber of voids in centres and shape thefuture of the industry going forward. Theanswer to this rather daunting challenge is no.But if the question is rephrased to ask whetherF&B can contribute to the future shape of theindustry, then the answer is a resounding yes.

9 Branded restaurant market to reach £22bnby 2018, Hospitality & Catering News,(27 June 2013).

10 Property: Dining out on European retail,JP Morgan Cazenove, (12 March 2014).

£22bnThe brandedrestaurant market ispredicted to grow from£16.4 billion in 2013 to £22 billion in 2018.

15%+It seems unlikely F&B will increase beyond an average of 15-20% of floorspace in larger centres.


1. Introduction

There has been a steady change inconsumer behaviour regarding eating out,so much so that it has become part of ournational culture. Food journalist Kate Spicerhas observed: “If you look back a fewyears, eating out was not a culturalpastime. It was a very occasional, specialtreat. Now it’s become something like popmusic or fashion that we all consume on a regular basis.” This is reflected in thegrowth in value of the sector — currentlyalmost a third of all food expenditure ison eating out. It may have started as amarriage of convenience however F&Bwithin shopping centres looks like becominga lasting, mutually beneficial relationship.

When the problem of voids raised itselffollowing the recession, F&B may havepresented a useful stopgap solution forsome. Anecdotal evidence suggests that asegment of F&B operators were keen tohave access to the high footfall of centreswhile some landlords appeared to welcomethe opportunity to fill vacant space withnew occupiers.

Now, landlords have had time to reflect onF&B and its contribution. They have seenthat F&B can work in centres at muchhigher floorspace levels than would havebeen offered traditionally. The impact ofF&B in increasing dwell time has long beenaccepted. However, centre owners haverealised that they are moving away froma model where the shopper is merelyrefuelled to one where F&B adds to theoverall experience of the centre and helpsto build engagement and loyalty.

The overall question posed in this reportseeks to address whether F&B can helpshape the future of the shopping centreindustry going forwards. This report isintended to examine the changing roleof F&B within shopping centres and tooutline possible scenarios for itsfuture development.

“If you look back a few years, eating out was not a cultural pastime. It was a very occasional, special treat. Now it’s becomesomething like pop music or fashion that we all consume on a regular basis.”Kate Spicer Food journalistSource: Top French chef declares London capital of cuisine, The Telegraph – 15 January 2011

1/3rdCurrently almosta third of all foodexpenditure ison eating out

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The research sought to explore the following:

• Trends analysis: how has the proportionof F&B changed within the retailenvironment over the last 10 years? Howis it likely to change in the future?

• The role of F&B within the shoppingcentre: integration of F&B within retailenvironment; does it complement theretail offer? Does it increase thelikelihood of increasing retail spend?

• Proportionality and dispersion of space:is there an optimal balance of F&B in a

retail environment which contributes toits vitality?

• Evening / night time offering: can anevening F&B offer provide a salientargument for extending retail openinghours? What are the challenges ininfluencing retailers to remain open intothe evening and encouraging F&B to takeup space in the centre?

• The contribution of F&B in enhancingthe value of a centre: how can weevaluate the added benefit of additionalfootfall, dwell time, etc.?

It may have started as a marriage ofconvenience but food and beverage withinshopping centres looks like becoming alasting, mutually beneficial relationship.

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In terms of methodology, there were fourkey workstreams for the research:

1. Analysis of statistical information(Savills data as well as data suppliedby Experian GOAD and CallcreditInformation Group)

2. Desk research using publishedinformation sources (e.g. Property Week,Peach Report, Big Hospitality, etc.)

3. In-depth interviews with acombination of property owners,F&B operators, retailers, consultantsand industry commentators

4. Case studies

The first stage involved analysing statisticalinformation. The research explored theproportion of floorspace currently takenup by F&B within Savills’ managed shoppingcentre portfolio. This portfolio accountsfor over 10% of the shopping centre marketand provides a snapshot of the currentF&B apportionment in this segment.

Data from GOAD was then interrogated toanalyse over 17,000 retail properties acrossthe UK. This helped to determine the extentto which F&B within retail has changed overa specific time period. Information provided

by Callcredit Information Group (providersof retail and leisure intelligence) was alsoexplored to look at the proportion of F&Bwithin the current retail environment.

Information was then gathered fromnumerous property and category-specificpublications to identify current trends in F&Band their likely impact on the wider retaillandscape. Examples of publications includedProperty Week, Shopping Centre Magazine,Peach Report, Retail Gazette and Horizonsamong others. In addition, annual reports aswell as transcriptions from presentationsmade by the various owners were examined(please see Appendix 3 — bibliography).

The final stage involved speaking with keyfigures within the property and F&B sectorsto discuss various issues in more detail.Companies and individuals includedproperty owners, F&B operators, retailersand industry experts.

It should be noted that certain retail propertytypes were excluded from the research.For example transport hubs were notexplored in detail as these serve a captiveaudience for which shopping and eating arean ancillary activity. In addition, retail parks(although forming a significant part of theretail economy) were not explored as F&B

There are indications that F&B needs betterintegration within the overall centre proposition and its strategic management. Landlords are bringing expertise in-house by recruiting people with foodservice backgrounds.

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17,000Data from GOAD wasinterrogated to analyseover 17,000 retailproperties across the UK.

A diner is more likely to shop than a shopper is likely to dine, but the diner’s shopping may be less than the average.

provision is still relatively underdeveloped inthese locations and thus made it difficult todraw any meaningful conclusions.

Also not included in the research wasretailers’ use of F&B within stores as theoffer is often influenced by the retail storebrand and this creates a sub-section of themarket that is very fragmented and doesnot lend itself to broader analysis. Thediversity of locations for in-store F&Boffers further exacerbates this issue.

Finally, the steering group decided that thefocus of this exercise should be on the keystakeholders within the F&B and retail

environment. Consequently the views ofconsumers have not been included withinthis research. However it is acknowledgedthat there have been significant changesboth in eating habits and in attitudestowards food quality, nutrition andprovenance; all of which have led to thedevelopment of foodservice provision andimpacted significantly upon the F&B sector.

We would like to acknowledge thecontribution of the various participantswithin this research and thank them fortheir support. (A list of contributors isincluded in Appendix 2.)


2. What do we mean by F&B?

The initial stage of the researchdetermined to understand what is meantby F&B and also which meal periods arebeing covered within shopping centres.

Four types of F&B were identified thatcover the various meal times andoperators within the sector. This is notan exhaustive list of eating out categorieshowever they cover the main sectorslikely to fit within shopping centres.It should be noted that both the finedining and bars categories were excludedfrom this research as these currentlyform only a small fraction of the F&Bprovision within shopping centres.The categories are as follow:

Casual / fast casualRestaurants that have a qualityproposition on food and an emphasis onvalue. This often involves having focusedmenu options and / or more informalservice arrangements than in otherrestaurants. Some provide at-table service(e.g. Pizza Express, Wagamama) withothers offering a less formal service /assisted-service (e.g. Nando’s).

Quick serviceFood usually pre-prepared and ready to takeaway (e.g. McDonald’s, KFC, Subway, etc.)

Coffee break and relaxSit-down or take-away, mainly serving hotdrinks and light snacks.

TreatsReady-made snacks which are takenaway to eat (e.g. Millie’s Cookies, BB’s,Auntie Anne’s, etc.)

The average day can be segmented into anumber of day parts with each having itsown specific eating behaviours and consumerrequirements. In the morning, as would beexpected F&B revolves around coffee andbreakfast. At lunchtime, speed is oftenessential so that people can grab foodquickly before carrying on their day.However, fast casual is also popular atlunchtime and within centres where there isa greater retail and F&B offer (and thereforeincreased dwell time), and lunchtime canstretch well into the afternoon. There arealso cases where younger people use themid to late afternoon to socialise oncethe academic day has ended.

Given the food service business model, the most successful F&B operators have an offer that can stretch across multiple day parts and eating occasions.

50%Approximately 50% of profits for F&Boutlets derive fromthe dinner eatingoccasion.

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In the evening, diners are prepared toinvest more time in the eating occasionwhich means F&B can be a moresophisticated and profitable offer (onaverage approximately 50% of profits forF&B outlets derive from the dinner eatingoccasion). In addition, F&B that sits withina wider leisure offer (more specifically acinema) is more likely to capture thisevening trade. The F&B operatorsconsulted said they were most attractedto locations with close proximity to acinema for these reasons.

Given the food service business model,the most successful F&B operators have anoffer that can stretch across multiple dayparts and eating occasions. This cateringacross different day parts has implicationsfor the type of space required. F&B needsspace that can be flexible enough to servecustomers at different meal occasions. Forexample, the ambience and set-up for amorning breakfast offer is likely to be verydifferent for lunch where speed of deliveryis paramount compared with late afternoon /early evening when a more relaxed offer

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The ambience and set-up for a morningbreakfast offer is likely to be verydifferent for lunch where speed ofdelivery is paramount.

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prevails. Operators such as Carluccio’s havebeen very effective in ensuring that theirspace can adapt to meet the needs ofconsumers at different day segments.The fact that they also have a retail offerin their outlets is a further strength intheir overall proposition.

In addition, the ability to use the samespace and modify the offer to cater acrossdifferent day segments gives greater profitopportunities through longer trading hoursand repeat visits. Creating a positiveexperience for centre visitors is crucial toattracting footfall and generating loyaltyand repeat visits. An attractive F&B offerundoubtedly enhances the visitor’sexperience. Furthermore, it serves as abridge between shopping occasions so thatvisitors are retained within the centrewhen they feel the need for food andrefreshment. In terms of valuation,measuring the specific impact of F&B ona scheme is dependent upon such factorsas size of scheme, footfall, shopperdemographics and the competitiveenvironment. Suffice to say, a relatively

poor F&B offer is more likely to have anegative impact on valuation.

The type of F&B offer that is likely to addgreatest value to most shopping centresis the one that delivers the best possiblecustomer experience and spend, within arelatively short time period. A key metricfor food service is the revenue generatedper minute. This metric is a function of theprice charged for food, divided by the dwelltime within the outlet. This value increasesfrom a relatively low base for fast foodtype operators through to counter serviceand fast casual dining.

There will always be exceptions to thismodel, however fast casual dining formatsare very effective in charging a relativelyhigh price for their product while beingable to have a high throughput ofcustomers. Significantly, the revenue perminute for more formal, table servicedining drops relative to fast casualunless these outlets are able to attractcustomers over the ‘dinner’ eatingoccasion. Dinner, which extends well

The type of F&B offer that is likely to add greatest value to most shopping centres is the one that delivers the best possible customer experience and spend and within a relatively short time period.

8pmFor most centresthat cease retailtrading before 8pm, fast casualdining representsthe best type ofF&B offer to attractinto the centre.

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into the evening, can be a critical daysegment for restaurants as it can includesignificant, high-margin alcohol sales. Formost centres that cease retail tradingbefore 8pm, fast casual dining representsthe best type of F&B offer to attract intothe centre based upon the combination ofturnover, return on investment (ROI) foroperators and the quality of experiencegenerated for visitors.

According to research by Companies andMarkets11, fast casual is priced to enableyoung consumers to dine out, bridging the

gap between fast service (with an averagespend per trip of £3.47) and more full-service dining (average spend £9.46).

Ultimately, as the eating habits of consumershave changed, successful F&B offers withinshopping centres have adapted and areresponsive to this. Change is occurring andshopping centres will need to be even moreflexible as habits continue to evolve.

Operators such as Carluccio’s have been very effective in ensuring that theirspace can adapt to meet the needs ofconsumers at different day segments.

11 UK casual dining market dominated byNando's, CompaniesandMarkets.com,(14 January 2013).


3. The relationship between F&B and retail

There are some fundamental differencesbetween F&B and retail that are worthnoting. There is a biological imperative toeat — while we may not always eat thestandard three meals a day, biology drivesus to eat throughout the day. It is this samefactor that also limits us in the amount offood that we can consume. JonathanDoughty of Coverpoint sums this up:“People can go out and spend until theyrun out of money but there is only a finiteamount that they can eat during the day.”

Retail has undergone a period offundamental change due to the impact ofonline, multi-channel models and therecession. Foodservice has not been affectedin the same way — indeed it is one of thefew industries that has stood up well duringthe recession as Peter Martin of CGA Peachcommented: “87% of the population eat out,44% of the population eat out every weekand the market has been pretty flat all theway through the recession, so it’s about asrecession proof as anything at the moment.”

F&B from a regional perspectiveThere are few, if any, significantdifferences in F&B on a regional basis.There are a number of food concepts thathave developed and succeeded on aregional basis and there seem to be fewbarriers to concepts moving around todifferent areas of the country. Theexception to this is London which is quitedifferent to the rest of the UK.

London is one of the world’s greatest citieswhen it comes to the quality, variety andvolume of F&B outlets. It has benefittedfrom a rich mix of cultures that includesfoods from around the world. Consumershave become used to an ever-changing mixof restaurants and food outlets. Thisdynamism within London-based foodserviceappears to be a major factor in its appealand growth. Indeed, multi-Michelin starredchef Joël Robuchon identified London as“very possibly the gastronomic capital of theworld … because it’s only in London that youfind every conceivable style of cooking.”

“Very possibly the gastronomic capital of the world… because it’s only in London that you find every conceivable style of cooking.”Joël Robuchon Michelin starred chefSource: Top French chef declares London capital of cuisine, The Telegraph – 15 January 2011

87%87% of thepopulation eat out,with 44% eatingout every week.

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The F&B landscape outside the capital is very different.This is not to say thatF&B concepts developed outside thecapital are any less successful, they justoperate in a different environment.

London has a very diverse population bothculturally and ethnically. This creates ademand for an equally wide range of foodservice offers. There are other behaviouraldifferences — for example there are muchgreater levels of socialising after work.This can lead to some blurring betweeneating out as a specific activity and simplyincorporating it into the average workingday. Another difference is the relativelyhigh numbers of people that commute intothe capital when compared with the restof the UK. High demand on the transport

infrastructure means that journeys areoften staggered leading to extended andless well-defined eating occasions / daysegments — breakfast may merge intolunch, afternoon into evening dining, etc.

The F&B landscape outside the capital isvery different. This is not to say that F&Bconcepts developed outside the capital areany less successful, they just operate in a different environment — their customershave not necessarily been exposed to thebreadth of offer available in London. As in

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retail, a concept that is successful inLondon may struggle to gain traction andacceptance elsewhere in the UK. F&Bconcepts developed on a regional basismay enter the London market successfullyhowever there are examples of regionalsuccesses failing in the capital. The keypoint is that operators should take thesedifferences in behaviour and thecompetitive context into account.

Success in London does not alwaysguarantee that a concept will succeednationally and vice versa. Demographicsdiffer greatly throughout the country andwithout consideration of regionaldifferences, failure may become likely.

The capital can be regarded as a hothouseenvironment where new foodserviceconcepts can develop and flourish. Forexample, fast casual Mexican conceptTortilla has established its reputationwithin London and is now expanding acrossthe UK. Openings beyond the capital will

include Trinity Kitchen within the TrinityLeeds development, and a unit in thenew Birmingham Grand Central station.

Jemima Bird, Marketing Director of TragusGroup (owner of Café Rouge and Strada)says that although fast casual has takenthe industry by storm, there needs to becaution when expanding outside of thecapital: “(London) is much edgier as adining out market than if you went to even somewhere like Manchester — quite a funky town — where they are still lookingmore for chain restaurants. I think it willbe a good few years before the conceptgraduates far out of central London.”

Nevertheless, there are a number of F&Bconcepts that have developed without aLondon presence. Barburrito is an exampleof a successful concept that has beendeveloped on a regional basis. Only oncethe concept has been proven in the regionshas Barburrito entered the London market.

Like retail, consumersin London may bereceptive toa particular F&Bformat and offerthat will struggleto compete outsideof the capital.

“(London) is much edgier as a dining out marketthan if you went to somewhere like Manchester-quite a funky town - where they are still lookingmore for chain restaurants. I think it will be a good few years before the concept graduates far out of central London.”Jemima Bird Marketing Director of Tragus GroupSource: Families get a taste for fast casual dining – Marketing Week, 02 August 2012

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What works within the context of a largeregional shopping centre may notnecessarily work within secondary shoppingcentres within the regions. In addition,F&B offers can differ markedly within amajor town or city centre compared witha shopping centre in the same location.

In summary, while innovation is alwaysneeded, caution should also be exercisedwhen adopting a new concept that hasonly been proven in London and has yetto expand into other regions. Like retail,consumers in London may be receptive toa particular F&B format and offer that willstruggle to compete outside of the capital.

There are a number ofF&B concepts that havedeveloped without aLondon presence.Barburrito is an exampleof a successful conceptthat has been developedon a regional basis.

F&B concepts developed on a regionalbasis may enter the London marketsuccessfully however there are examplesof regional successes failing in the capital.

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4. Current usage of F&B in shopping centres

In order to gain a robust view of the currentproportion of F&B usage within retail, anumber of available sources were explored.

In the first instance the amount offloorspace currently under managementwithin the Savills portfolio was analysed.Savills manages circa 10% of the shoppingcentre market and is a top three retailmanagement agency. Consequently it wasfelt that this would provide both anindicative view and a useful initialbenchmark. The total net floorspacebeing analysed was 16.7 million sqft.Of this, 1.38 million sqft was apportionedto F&B — 8% of the total.

Independent sources were then explored tosee how this figure compared. At the 2012BCSC Conference, in a presentation entitledA View From The Hill: Emerging Trends inFoodservice and Opportunities for ShoppingCentres, Jonathan Doughty of Coverpoint (aleading consultancy practice in commercial,leisure and retail foodservice) quoted afigure of 8% gross leasable area (GLA).

Finally, data provided by CallcreditInformation Group was explored. The

percentage of units apportioned to thecategories described as ‘cafe andtakeaway’ and ‘restaurant’ again totalled8% which mirrors the 8% highlighted inthe two sources mentioned previously.Figure 1 shows the proportion of unitsby different retail scheme types.

The proportion of cafe and takeaway andrestaurant changes depending on the typeof retail location. City centres have agreater proportion of units dedicated toF&B — approximately 11% — however thereis a wider dispersal of units across a widerarea within a city centre compared withthe more compact nature of a shoppingcentre. Similarly, around 11% of unitswithin large retail parks account for F&Busage. However as the number of unitswithin retail parks is generally fewer, thismeans even a small number of F&B unitscan account for a larger proportion.When regional out-of-town shoppingcentres (including the Intu TraffordCentre, Westfield London and Stratford,Meadowhall, etc.) are explored thepercentage of units accounting forF&B leaps to around 14%.

14%The percentage of F&Bunits in regional out-of-town shopping centresis on average 14%.

Figure 1: Proportion of leisure units* by different scheme types

All shopping City Large Large retail Regional out of townCategory centres centres towns parks shopping centres

Café and takeaway 6% 7% 6% 8% 8%

Restaurants 2% 4% 2% 3% 6%

Café and takeaway / restaurants total 8% 11% 8% 11% 14%

Entertainment and hotels 8% 7% 6% 3% 0.8%

Pubs, bars and clubs 8% 7% 6% 1% 0.5%

Leisure total 24% 25% 20% 15% 15%

Retail total 76% 75% 80% 85% 85%

Total 100% 100% 100% 100% 100%

*Number of units only. Includes F&B. Source: Savills analysis of Callcredit Information Group data.

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Indeed, during the interview process,it was noted that for newer schemes,demand for F&B had far outstripped theproportion of space originally apportioned.Conversely, within secondary shoppingcentres, this number can be significantlylower than the average.

A prime example of this is New River Retailwhich owns 23 shopping centres that are‘commodity-focused’ on the grocery andvalue sub-sectors. F&B currently represents3% of its portfolio12. New River Retailhowever does state that there is potentialto grow this rapidly expanding area.

Change of use to F&BThe amount of space apportioned to F&Bwithin schemes has risen dramatically inrecent years. To look at the extent of thisrise, GOAD data was analysed whichprovides plans and information on over450,000 retail occupiers coveringapproximately 3,000 town centre shoppingareas, out-of-town retail parks andneighbourhood towns in the UK and Ireland.

Analysis of current F&B usage alsohighlights the extent of conversions to F&Buse in the last few years. Figure 2 shows

40,000,000

35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

02000 20022001 2003 2005 2004 2006 2007 2009 2008 2010 2011 2012

Floo

rspa

ce (s

qft)

2000 20022001 2003 2005 2004 2006 2007 2009 2008 2010 2011 2012

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

Floo

rspa

ce (s

qft)

Figure 2: F&B lettings by floorspace 2000-2012Source: Savills analysis of GOAD data (Covers all types of retail locations.F&B includes A3 / A4 / A5 units)

Figure 3: Floorspace convertedfrom A1 to F&B use2000-2012Source: Savills analysis of GOAD data (Covers all types of retail locations.F&B includes A3 / A4 / A5 units).

12 New River Retail Annual Report,New River Retail, (2013).

The inclusion of F&B in centres is oftenjustified by the belief that it leads toincreased dwell time and therefore growingconsumer retail spend. Analysis of dwelltime data challenges this assumption.

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the amount of floorspace let to F&Bbetween 2000 and 2012.

From 2010 onwards, there was a sharpincrease from 7.6 million sqft in 2009 tojust over 35.5 million sqft in 2011 — a nearfivefold increase in just two years. Theaverage unit size for A3 during this periodremained relatively stable. However theaverage A5 unit size halved from 1,890 sqftin 2002 to 946 sqft in 2011. This canpossibly be attributed to an increase inquick service / counter service operationswhich require less space (e.g. juice bars).

The increase in F&B is also reinforced whenchanges in use from A1 and A2 to F&Bacross the same period are analysed.

The amount of floorspace converted rosesteadily over the last decade to just over700,000 sqft in 2009 with another sharpincrease to just under 3 million sqft in2011 — an increase of more than fourtimes the space.

Figure 3 shows a dramatic upward trendin conversion and lettings that reached apeak in 2011. The spike in both overalllettings and conversion to F&B can beattributed to a number of factors. For some

landlords, F&B was considered an easysolution to the issue of vacant units whichhit the retail sector during the recession.Rationalisation of retailers’ portfolios andinactivity in their expansion plans duringthe recession presented F&B operatorswith an opportunity to gain access tolocations that were previously unavailable.Consequently, vacant units (which maypreviously have been filled by retail)became occupied by F&B operatorsduring 2010-2011. As David Harris ofEstates Gazette states: “Converting shopsinto restaurants can seem an obviousproblem solver for landlords. It’s allabout market forces.”

However the revival of expansion plans byretailers post-2011 (combined with animprovement in both consumer confidenceand economic activity) led to greatercompetition for space between both F&Band retail. In other words, those unitswhich were let to F&B operators in theprevious two years were now in demandfrom retailers once again. This increase incompetition meant a net reduction in bothconversions to A3 and in overall A3 lettings.

Also during this period, quick serviceoperators underwent a period of expansion

3msqftIn 2011, 3 millionsqft of floorspaceconverted to F&B use.

“There is a real tendency for landlords to think that if retail isn’t working thenrestaurants will fix it. But you can’t always do this. Eventually you will see a dilution of trade for the restaurateurs.”Martin Bloom Insight Retail ConsultingSource: Leisure moving in on malls – Peach Report, 19th February 2014

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with the quick service sector growing by2.7% in 2008 and 5.1% in 200913. The lowerprice of quick service meals, which averagedat £5.30 in 2009 (£7.32 lower than theaverage price of a meal in the restaurantsector), combined with an increased effortto introduce healthy eating options, helpedthis group weather the economic storm.

Changing shopping habits also led propertyowners to provide a greater quality ofexperience within their schemes in anattempt to lure the consumer away fromonline shopping. F&B has been a keyfactor in this strategy.

It is also conceivable that the Olympics ledto a surge in provision of F&B particularlywithin London and the South East.However, the specific impact of theOlympics is difficult to quantify.

Ultimately there is a limited amount offloorspace that can be converted cost-effectively from retail to F&B. Recentestimates including BCSC’s report on theimpact of multi-channel retailing,14

suggests, that approximately 20% of

retail space is currently surplus torequirements. This raises the question ofwhether F&B can utilise this surplus andalso whether too much F&B can have anegative impact. Consultant Martin Bloomof Insight Retail Consulting expresses hisconcerns thus: “There is a real tendencyfor landlords to think that if retail isn’tworking then restaurants will fix it. But you can’t always do this. Eventuallyyou will see a dilution of trade for the restaurateurs.”15

It should be noted that the 2012 figures forboth lettings and conversions to F&B aremore than double the space compared withthree years earlier. It is possible that theapparent rush to incorporate F&B intocentres has slowed its pace, albeit to a moresteady, less dramatic rate going forward.

However, the recent change in the law —meaning planning permission is not arequirement for change of use from A1 to A3 for the first two years — will help to keep F&B operators competing for space going forward.

13 Survival of the fittest: the evolutionof the restaurant industry, Key Note,(30 June 2011).

14 The Rise and Rise of Multi-ChannelRetailing, BCSC, (2012).

15 Retail & Leisure Supplement, EstatesGazette, (Spring 2014).

15%UK’s independent coffeeshop and café industrysaw a 15% rise in newbusinesses openingbetween 2011and 2013.

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5. Failure rates of F&B operators

In terms of failures, figures from theOffice of National Statistics and Red FlagAlert16 system by Begbies Traynor —the UK’s largest independent practice ofCorporate Rescue and Recovery specialists— show that the number of restaurantoperators which were incorporated(i.e. registered with Companies Houseas a legal entity) in 2010 were more thantwice as likely to have failed in the firstyear compared with those incorporated in2008 — and even more likely to fail in2012. This is shown in Figure 4.

Although the banks were bailed out in2009, the credit crunch was at its heightin 2010 which led to a dramatic slowdownin consumer spending. In addition, theeconomic downturn allowed a numberof fledgling businesses to emerge. Forexample, the UK’s independent coffeeshop and café industry saw a 15% rise innew businesses opening between 2011and 201317. This will have led to a morecompetitive environment in recent timesand an increase in the likelihood of newcompanies failing within the first couple

16 Red Flag Alert is a business databasecontaining over 7.5 million records on everybusiness in the UK, from the sole traderthrough to limited and quoted companies.

17 UK sees 15% rise in independent coffeeshops, Hospitality & Catering News,(04 December 2013).

Figure 4: Failure rates of restaurant operators between 2008-2012

% of operators failing % of operators failingYear in the first year in the second year

2008* 6.1 25.9

2009* 7.8 27.7

2010* 13.1 29.2

2011* 6.1 N/A

2012** 14.2 21.2

* Source: Office of National Statistics – figures only available up to 2011.** Source: Begbies Traynor – covers companies described as Insolvent, Dissolved or Not Trading. Not split by property type.‘Restaurants’ are as defined by Standard Industrial Classification (SIC) 2007 Code – 56101.

In terms of failure rates for F&B operators,those incorporated in 2010 were more thantwice as likely to have failed in the first yearcompared with those incorporated in 2008 –and even more likely to fail in 2012.

21.2%Operators incorporatedin 2012 failing in theirsecond year.

A restaurant operator which set up in 2012in the Greater London area was almost aslikely to fail in the first year as an operatorin the Tyne & Wear area.

23


of years. However it is clear that,despite generally low levels of failurein the first year, many businesses ofthis type find the second year muchmore difficult.

From a regional perspective, a restaurantoperator which set up in 2012 in theGreater London area was almost as likelyto fail in the first year as an operator in

the Tyne & Wear area (13.8% and 15.0%respectively). However, the failure rateincreased only slightly in Tyne & Wearin the second year (16.7%) while thefailure nearly doubled in GreaterLondon to 24.7%. This highlights howhigh levels of competition can make itmore difficult for new businesses tosurvive and thrive.

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6. F&B and the wider urban agenda

There has been much recent debate onthe future of the high street and therelationship between shopping centres andmore traditional retail. This subject area iscomplex and has been the subject of severalrecent high profile reports, including theDistressed Town Centre Property Taskforcereport — Beyond Retail18. F&B certainly hasa role to play in the reinvigoration of urbancentres however it is not the answer inisolation. An increase in high street F&Bprovision is likely to be a by-product ofmore people being attracted to living intown and city centres.

New River Retail’s Regent Court scheme inLeamington Spa has transformed a morefashion-oriented area into a food hubincorporating some of the major fast casualoperators. This is now the town’s principalrestaurant and leisure destination. NewRiver Retail adopted this strategy totransform Regent Court in response tohigh demand from restaurant operators.2013 saw the successful opening ofNando’s restaurant, the pending arrival

of Caribbean restaurant chain Turtle Bay,plus interest from a number of other foodand restaurant operators. The void ratefor the centre has dropped from 13.5% to4%, indicating that the strategy andconcept of a food quarter in the centreof Leamington has been successful.

F&B operators report a significant degreeof resistance from urban planners towardsF&B provision. In particular, there werereports that some planners tend to groupall establishments selling alcohol togetherand that alcohol is almost always equatedwith anti-social behaviour. This appears toindicate a need for a more enlightenedapproach that differentiates betweeneating establishments and those with agreater focus on alcohol sales. There areother issues around strict zoning in sometown centres that also mitigate againstinvestment and development althoughit is not intended to discuss these issueswithin this report.

18 Beyond Retail: Redefining the Shapeand Purpose of Town Centres, BCSC,(29 November 2013).

Regent Court, Leamington Spa

>4%The void rate forthe Regent Courthas dropped from13.5% to 4%.

“We’re now seeing competitive tension, with multiple offers for units... this competitive tension bodes well for rental growth… sales densities are also strong with… food and beverage up over £575 per sqft.”Claire Barber Head of Shopping Centre Asset Management at British LandSource: Whiteley Shopping Centre Investor Day presentation, British Land, 19 September 2013

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7. The economic argument forF&B in shopping centres

Historically, F&B usage has delivered lowerlevels of rental income when comparedwith retail usage. Given this, if there was achoice between retail and F&B, retail unitswould usually be preferred. One landlordexpressed this view as: “Caterers justcannot afford to pay what retail pays,that’s just how it is. The economics arevery different, so if you give over morespace (to F&B) you’re gaining more rentalincome overall but in comparison, if it hadbeen retail space, then it’s a decline.”

Some interviewees however indicated thatF&B operators are paying rents that are atparity with retail. In some cases, there isanecdotal evidence that food service isprepared to pay above A1 rates to securespace in a desirable scheme. As oneinternational food operator indicated: “I suspect in most locations, you’llprobably find the restaurateur willing to pay more than the retailer. I think it’scertainly levelled out outside London.”

Some landlords are less convinced aboutthis parity and think it can pose somedifficult questions around the F&B occupiermix. This was touched upon in a previoussection and highlights the difficultiesinvolved in getting the right fit ofoperators. One landlord was quoted assaying: “The big chains such as TheRestaurant Group (owners of Frankie &Benny’s and Chiquito’s) can afford to paypretty big rents because of the size of theirestates and their margins are strong. If youwant the little independents in, then theycan’t pay the same sort of money. As alandlord you have a dilemma in terms ofyour mix — do you go for the same oldquality, consistent, predictable chainsor do you vary the mix?”

Other landlords feel that the competitionfor space from F&B operators in primelocations is driving up overall rentalvalues. Claire Barber, Head of ShoppingCentre Asset Management at British Landoutlined this in a recent presentation toinvestors: “We’re now seeing competitivetension, with multiple offers for units...this competitive tension bodes well forrental growth… sales densities are alsostrong with… food and beverage up over£575 per sqft.”

The impact of F&B on landlords’ leaseprofiles may also add value to the centre.

Landlords have an opportunity to includeF&B on a range of short and longer termleases with the latter creating a better riskprofile for asset managers. Indeed, manylarger F&B operators would prefer longleases in order to recoup their capitalexpenditure in fit-out which is oftensignificantly higher than in retail as oneF&B operator interviewed described: “Our investment is huge, a typicalrestaurant would cost you anywherebetween £600,000 and £700,000 to fit out— as a result, we want a long lease, 15-25year leases… retailers are signing up forfive year leases, but you know, they’reputting a bit of racking up and that it’s it — our investment is a lot more.”

Analysis of averagerental valuesThe research conducted analysis on rentalinformation based on a sample of Savillsmanaged portfolio. This analysis wasconducted by taking the leased area (in sqft) and calculating the cost per sqftfor each occupier and then comparingretail occupier with F&B operators within a particular scheme.

The analysis of retail rents to premisesunder 5,000 sqft was restricted for anumber of reasons:

• F&B operators (generally) take spacesunder 5,000 sqft (and often less than1,000 sqft)

• occupiers with a demise over 5,000 sqfttended to have lower average rents persqft. Some anchor retailers hadnegotiated rental values that weresignificantly lower when compared withother retail occupiers and this createda skew in the average rental figures

• landlords would not be able to let spacesover 5,000 sqft to most F&B operators(possibly excepting pub / bar venueoperators) so the research would not bemaking a like-for-like comparison.

The average rental values for retail andF&B within 17 different shopping centreswas compared as at the start of 2014. Thiscovered a total sample of 645 leases. Thesecentres were quite varied both in terms ofgeographical location (ranging from theSouth East to Scotland) and their size /occupier mix. The results of this analysis

“Our investment ishuge, a typicalrestaurant would costyou anywherebetween £600,000 and£700,000 to fit out - as a result, we want along lease, 15-25 yearleases… retailers aresigning up for fiveyear leases, but youknow, they’re puttinga bit of racking up and that it’s it -our investment is a lot more.”Source: Gondola Group

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show that in the majority of centres,average rents for retail space is higher asshown in Figure 5.

Figure 5: Comparison of shoppingcentre average rents for retail andF&B outlets

Number of centres Number of centres where averagewhere average retail (<5,000 sqft)F&B rents higher rents higher

5 12

Figure 6 illustrates the relative differentialsbetween average rents for F&B and retailspace in 16 of the 17 centres underconsideration.

Overall it was found that average rents forF&B were at parity or below the levels paidby retailers in similar sized spaces. Lookingat the average rental differentials, theaverage differential showed that retail rentswere 21% higher than F&B. F&B rents werehigher than comparable retail spaces in onlyfive schemes and could be said to be aroundparity (less than 10% difference) in a furthertwo schemes. For the remaining 10 shopping

centres, the average rents paid by retailerswere higher than F&B operators.

This data runs contrary to some anecdotalcomment that F&B rents are at parity oreven exceeding retail rents. Indeed, ouranalysis has included some very small(under 500 sqft) F&B premises that haverelatively high rentals for the area taken.It could be argued that these units haveartificially inflated the average F&B rentallevels and should be excluded. In this case,there would be an even higher differentialbetween retail and F&B rents.

Analysis of average lease lengthsDuring the research there has been somecomment around the length of leases takenby F&B operators. The capital cost of fittingout and equipping an F&B outlet is highrelative to retail. F&B operators are oftenseeking to enter centres with security oftenure in order to recover these set-up costs.

To explore this further, tenancy data froma sample of 26 different shopping centresmanaged by Savills (as of March 2014) wasanalysed to determine any differences

Figure 6: Comparison of average rents for retail andF&B outlets for each centre studied

Note: This chart excludes some outliers from the data set.

£40£20 £60 £80

£80

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1510 20

20

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ears

)

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F&B lease longer Retail lease longer

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Figure 8: Comparison of shopping centre averagelease duration for retail and F&B outlets

Average rents for F&B were at parityor below the levels paid by retailers insimilar sized spaces. The average rentaldifferential showed that retail rentswere 21% higher than F&B.

between average lease length for retailerscompared with F&B operators. The totalsample of leases analysed was 1,017. Theresults of this analysis are shown in Figure 7.

Figure 7: Comparison of shoppingcentre average lease duration forretail and F&B outlets

Number of centres Number of centres where average F&B where average retaillease duration longer lease duration longer

22 4

Note: This analysis was subject to the same restrictions takeninto consideration when analysing rental values (Figure 5).

This analysis demonstrates that themajority of F&B leases are longer thanthose taken by retailers. Overall, F&Bleases were 34% longer than comparableretail leases. There is considerablevariation depending on the type of centre,location and sophistication of the foodoffer. The data from each centre isanalysed in Figure 8.

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8. The impact of F&B on retail

The research has been able to analyse theimpact of F&B on the wider shoppingexperience through the use of dataprovided by Path Intelligence. By mappingvisitor journeys using its FootPathtechnology, Path Intelligence showsprecisely where customers have been, howlong they stayed, and what they did next.The data was used within the context ofthis research to look at two areas:

• does F&B contribute / complement theretail offer within a shopping centre?

• does having an F&B offer provide anargument for extended retailer tradinghours? (which is covered further on inthe report — Section 10).

There is a commonly held belief that F&Bwithin a shopping centre helps to extenddwell time (and therefore consumer spend).The research sought to understand whetherF&B, and increased dwell time, contributedto an increase in the number of visits tonon-food stores within a scheme.

In general, there is a linear relationshipbetween cost and dwell time/ experience.Put simply, the more a consumer pays forF&B, the more they would expect toreceive in terms of an experience (andlikely dwell). This is shown in Figure 9.

Path Intelligence analysisPath Intelligence first of all looked atwhether those who dined within a schemewere more or less likely to visit non-foodstores. There were 15 sites included in thestudy in total with data analysed across atwo-year period. Centres were situatedacross the UK from the South East toScotland, varying from smaller secondarycentres to large regional centres all with aminimum footfall of 3 million visitors perannum. (Note: Confidentiality preventsPath Intelligence from naming schemesincluded in the analysis. Consequently noinference should be made between specificschemes mentioned within this documentand those included in the analysis.)

Overall, the evidence suggests a ‘substitution’effect, whereby a visit to an F&B outletreplaced a step in the shopping journey.

Of the 15 sites Path Intelligence includedin the study, in all but two instances, theaverage number of stores visited by non-

eating shoppers (i.e. those whose visit issolely for non-food purposes) was at leastone greater than the average number ofstores visited by diners. This was consistentirrespective of the type of centre or typeof F&B offer. However, it was particularlypronounced in cases where the F&Boffer had a greater proportion of fastcasual operators.

In other words, schemes with more of afast casual offer provided a bridge betweendifferent parts of the shopping journey(a case of shop-eat-shop) and extendeddwell time; thus increasing the potentialfor people to remain in the centre andcontinue to shop. However it was notnecessarily shown to have increased thenumber of stores visited and diners werenot shown to have shopped more as aconsequence of the food offer.

A good example of successful integration isthose retail anchors that also have an F&Boffer. Looking at one centre with a numberof strong anchors that include F&B, dwelldata showed that many shoppers visiting ananchor did not venture beyond the anchorstore itself but spent a significant amountof time within it. While data for the F&Boffer within the anchor store cannot beisolated it appeared that it was able toretain shoppers as it provided everythingshoppers needed, including foodservice —in effect the anchor was operating as acentre within a centre. While this hasimplications for the occupier mix within a centre, it also shows the value of betterintegration of F&B in retaining customersand increasing dwell times.

Where there were exceptions to thesubstitution effect the following was found.A large regional development with stronganchors and a restaurant-focused foodoffer saw an average shopper visit just overone store. Those who visited F&B (roughlya quarter of visitors) went to just overfour stores in addition to dining.

Dwell time for those who only shoppedwas 99 minutes, compared with 111minutesamong those who ate. Combining bothshopping and eating brought the average to 150 minutes. While those who both ateand shopped did not spend as much time in each store as the dedicated shopper, they travelled noticeably more widelyacross the site.

99minDwell time for those who only shopped was 99 minutes,compared with111minutes among those who ate.

29


Diners here made a greater dwellcontribution than at any other siteconsidered however this appeared to beanomalous. When looked at in closerdetail, it appears one of the anchors onthis scheme has an upscale restaurantoffer. Therefore it could be argued thatthe low numbers of stores visited onaverage at this scheme (just over one) wasa consequence of its anchor providing agood food and non-food offer which meantshoppers did not need to visit as manystores (or indeed other F&B operators).

Nevertheless, the type of F&B offer couldhelp aid the likelihood of increased spendin other areas of the centre — in particulara more fast casual offer.

This presents an opportunity for schemesto provide a more integrated food and non-food offer, to encourage spend across a wider range of outlets. This wouldtherefore help F&B to impact positively on those metrics considered importantwhen looking at the economic impact of F&B on a centre.

There is a linear relationship between costand dwell time/experience. Put simply, themore a consumer pays for F&B, the morethey would expect to receive in terms ofan experience (and likely dwell).

Dwell / experience

Cos

t

Figure 9: The relationship of the different types of F&B between cost and dwell / experience

30


9. F&B in smaller centres and secondary locations

Many of the success stories for F&B incentres that have been publicised withinthe industry tend to focus on its impactwithin larger regional centres. Thesecentres, especially those built over thepast 4-5 years, have dedicated space forfood and beverage hubs — purpose builtspaces that help to attract F&B operatorsand integrate them within the scheme.

For smaller centres and centres that mightbe considered to be in secondary locations,F&B displays good potential to enhance theexperience offered to customers. Whilewe are not likely to see dwell times evenapproaching those of regional centres,F&B still offers the possibility to attractcustomers and to keep them within thecentre for longer. What is crucial is toavoid copycat offers that mimic the largercentres. Rather, a smaller yet well-selectedF&B offer that is tailored to the type ofshopping trip and visitor type shows greaterpotential to succeed. One F&B operatorvoiced its concerns: “A lot of smaller scaleschemes are trying to do the same thing…(but) the shopping occasion is verydifferent and so the dwell time is nowherenear as much… it’s a different occasion.”

Foodservice can act as a major attraction forcentres, provided it is the most attractiveportfolio of F&B offers in the local area. Thisdoes not mean that the F&B offer shouldreflect a fine dining experience. Rather,the F&B offer should be tailored to thedemographic profile of the catchment areacombined with the competitive environment.Using this profiling information, centres canthen seek to attract ‘best in class’ operatorsso that the centre offer is more attractivethan alternatives within the catchment area.

The lower total number of units in suchschemes means that F&B can have agreater relative impact on perceptions ofthe scheme. Given that small schemes mayhave only one or two foodservice units,there is a greater imperative for operatorswithin these units to have a flexible F&Boffer that can cover as many different daysegments as possible. Innovative solutionsto offering space, such as pods and kiosks,may also need to be considered in order toprovide adaptable solutions in such cases.

In an NPD Crest study19, a mean averagespend of around £9 per head showed thatvalue for money has a big role to play too,

“We match up the food offer with thedemographic. For our shoppers it is about aneveryday shopping experience. They know whatthey are going to be buying – dwell time is shortwith a high frequency of visits. This lends itselfmore to coffee shops and fast food.”Landlord

£11A mean average spendof around £9 per headshowed that value formoney has a big roleto play too, comparingwith just over £11spent in full-servicechains like Strada andGiraffe to £3.50 at fastservice outlets.

Eden Centre, High WycombeThe Heart, Walton-on-Thames

19 Families get a taste for fast casual dining,Marketing Week, (02 August 2012).

comparing with just over £11 spent in full-service chains like Strada and Giraffeto £3.50 at fast service outlets.

For smaller centres, the differing shopperprofile means that convenience and speedare far more important. Therefore, it islikely that the F&B offer will be mosteffective if it acknowledges these shoppingrequirements and therefore offers speedand convenience itself — fast casual andeven fast service will be more relevant inthese contexts. It is also difficult to createa critical mass of F&B offers in smallerschemes. One landlord summed it up thus:“We match up the food offer with thedemographic. For our shoppers it is aboutan everyday shopping experience. Theyknow what they are going to be buying —dwell time is short with a high frequencyof visits. This lends itself more to coffeeshops and fast food.”

The Heart in Walton-on-Thames is a mixeduse scheme with 50 shops, 11 restaurantsand cafes and 279 private flats. Thecatchment comprises a number of majorretail locations and competition is fierce.The scheme markets itself as a stress freeenvironment; where visitors can safely park,shop and socialise either under cover or alfresco. Its varied F&B offer including casualdining such as Carluccio’s, the artisanbakery Flours and the family-friendlyrestaurant Giraffe has provided a genuinepoint of difference within the catchment.

This focus on the experience and a morerelaxed environment has meant thatbetween 2010 and 2013, the averagenumber visits to its cafes and restaurants(and dwell time) has more than doubled.

The Eden Centre in High Wycombe is an875,000 sqft retail and leisure schemecomprising of over 120 shops and restaurantsas well as a 12 screen Cineworld cinema.Its food hub comprises a mixture of chainsand independents as well as differentfoodservice types. Average spend on F&B hasincreased 33% between 2011 and 2013 and ithas proved to be a successful scheme for anumber of the F&B operators.

Christopher Place in St Albans is a small,town centre-based scheme with a numberof established F&B operators within thescheme (i.e. Wagamama, Carluccio’s,Prezzo, Zizzi). Consequently the schemeserves as the dominant offer within thetown. In addition, the F&B operators onthe scheme reflect the more affluent andfamily-oriented demographic of thesurrounding area. As always, the golden ruleapplies — it really is all about having theright offer in the right place that is availableat the right times.

For smaller centres, the differing shopperprofile means that convenience and speed are far more important. Therefore,it is likely that the F&B offer will be mosteffective if it acknowledges these shopping requirements.

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33%+Average spend at the Eden Centre onF&B has increased33% between 2011 and 2013.

Christopher Place, St Albans

As always, the goldenrule applies – it reallyis all about having theright offer in the rightplace that is availableat the right time.

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A leisure offer is vital in shopping centresextending their trading hours into theevening. There is significant anecdotalevidence that as retail activity declines andthe evening progresses beyond 8pm, acinema or other leisure offer is essentialfor extending trading hours. Certainly, foodoperators have a preference to be situatedclose to a cinema. There are certain retaillocations where the F&B offer lends itselfspecifically to an evening / post-6pmprofessional audience (such as CanaryWharf) — however these types of schemesaccount for only a small proportion ofshopping centres across the UK and areless than typical.

The presence of a food hub within a centreis beneficial as this can often be operatedas a sub-unit within the centre. This canhelp facilitate opening well into theevening with the potential to reduce thenumbers of operational staff required toservice this area. In some cases, centresare configured to enable separatededicated exits for visitors using F&B orleisure facilities. This in turn enhances thecentre’s overall security by allowing theclosure of daytime entrances once retailtrading has ended for the day.

Trinity Kitchen is intended as a more‘edgy’ way of incorporating F&B into thecentre’s overall offer. It is over 20,000 sqftwith urban ‘warehouse’ styling anduse of interactive technology. TrinityKitchen features more boutique cafésand restaurants, along with rotatingpop-up restaurants, with a view toattract a different customer and be adestination in itself.

It is expected that Trinity Kitchen willincrease overall dwell time in the centre.So far, F&B has seen higher than predictedfootfall in the evening — 15-17% comparedto a predicted 10% between 5pm and11pm. Trinity Kitchen and the Everymancinema have added further to this.

However, retailers consulted were notconvinced that opening later tocomplement an F&B offer leads to asubsequent increase in their stores’ sales.Indeed many believed that the costsassociated with opening later into theevening outweighed the benefits andthat they had not seen a sufficientincrease in either footfall or sales tojustify opening in the evening.

10. F&B as part of the night time economy

Figure 10: Comparisons in pre- and post-6pm dwell time between different centre and visitor types

Pre-6pm Post-6pm

Average dwell Average dwell Average dwell Average dwell time in minutes time in minutes time in minutes time in minutes

Centre type (shoppers only) (F&B users) (shoppers only) (F&B users)

Larger regional centre (varied,fast casual / fast service F&B offer) 130 156 125 139

Smaller secondary centre(limited, fast service F&B offer) 84 116 55 71

Source: Path Intelligence — 16 schemes included in analysis with average annual footfall of 11.8 million.Footfall ranged from 5 million to 30 million visitors per year.

The Oracle, ReadingTrinity Kitchen, Leeds

>39%There was a 39% drop in dwell timeamong F&B users at the scheme with a smaller, less-developed F&B offer after 6pm.

>11%There was only an11% drop in dwelltime post-6pmamong F&B usersat the larger, well-developed scheme.

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Indeed, analysis by Path Intelligenceshowed that the combination of a morerestaurant-focused offer and later openinghours boosted dwell for food visitors morethan it did for those who only shop.

Comparing one large regional destinationsite with a smaller and less central site,the difference in pre- and post-6pm dwelltimes was stark.

There was a 39% (highlighted in orange)drop in dwell time among F&B users at thescheme with a smaller, less-developed F&Boffer after 6pm compared with only an 11%(highlighted in green) drop in dwell timepost-6pm among F&B users at the larger,well-developed scheme.

While diners may enjoy more leisurelymeals earlier in the day — at the expenseof store visits — this trend reversed aroundevening mealtime. The percentage of malltraffic in the food area was unchangedfrom peak lunchtime trends, and eveningvisitors left sooner.

This data seems to suggest that attractingdiners into the evening is a possibility(depending on the F&B offer) howeverattracting dedicated shoppers in theevening proves more difficult. In addition,some centres with an inward-facing F&Boffer feel that they are less likely toattract visitors from outside — even witha higher end offer. One centre managercommented: “Do you want to sit in ashopping centre at night to have a nicemeal? Lunch yes — but dinner? Maybe not —the ambience isn’t quite the same.”

Recent developments have also looked at amore outward-facing F&B offer. The Oraclein Reading is an example of a centre whichprides itself on a thriving F&B offer. Retailwithin the centre does not open past 8pm— however its outward-facing restaurantsand bars stay open until late (along with itscinema) and its riverside location providesa distinctive and differentiated diningexperience which would be difficult toreplicate internally.

The Round — the new development atTelford Shopping Centre — includes a foodhub with particular emphasis on thedevelopment of a cafe culture with acluster of new cafes, restaurants and barsdesigned around the dramatic and vibrantCentral Square. A key benefit of The Roundis the introduction of a night time economyto Telford and this will inevitablyreinvigorate the shopping centre andTelford town centre itself.

Although more difficult to achieve, thesuccess of an internal evening F&B offerappears dependent on having both thecritical mass and variety to attract visitorsinside. With an external offer, the moreatmospheric element (in addition to thechoice on offer) is the key to success.

Retailers typically struggle to sustainfootfall into the evening and often preferto close before 8pm unless they areencouraged to remain open either by leasecovenants or the potential of sustained /increased footfall. However for manyretailers, the costs of later opening (i.e.staff costs, energy costs, security, etc.)outweigh the revenue generated. Althoughsuch costs are relatively insignificant overa couple of hours, these add up over timemeaning the case for later openingbecomes less than compelling.

A leisure offer, typically a cinema, isusually required if a centre wishes toattract visitors well into the evening andnight time. F&B in itself is unlikely toattract sufficient trade to a centre on itsown. The exception to this is thoselocations with poor provision of F&B in itslocal area. In these cases, F&B can becomea focal point within the community foreating out. In essence, the scheme takeson the role of a de facto town centre.

“Do you want to sit in a shopping centreat night to have anice meal? Lunchyes – but dinner?Maybe not – theambience isn’t quite the same.”

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11. The future for F&B in retail

It appears that F&B will continue to grow asa proportion of overall space within shoppingcentres in the short term. However, therewill come a point when F&B is in aproportional balance with the otherelements of the centres’ offer and furtherexpansion may lead to dilution of the offer.Retailers and most F&B operators want foodservice within centres to be concentrated ina specific area. Food hubs are preferred forpractical reasons (i.e. utilities, extraction,etc.). Further, the synergy between differentoperators creates an overall impression ofvariety and choice that ensures a food hubbecomes an attraction in itself.

As discussed earlier, planning restrictionsin relation to change of use to F&B have relaxed — indeed one respondentcommented that F&B operators are“falling over themselves to take space”.

However, in the 2012 BCSC report The Riseand Rise of Multi-Channel Retailing, theauthors were of the opinion that it was not inconceivable that 20% of today’s retailspace will become surplus to requirements.Countering this by attempting to blindlyconvert any type of unit to A3 is notnecessarily the answer. It is about the right space in the right place within a given location.

Ultimately, the key to a successful F&Boffer is through understanding who isvisiting the centre and tailoring it to therequirements of the consumer. As AndrewSmith, Head of Investment in PortfolioManagement at British Land commentedrecently: “We believe the answer lies inthree key areas — a really detailed

understanding of the consumer, providingthe right services to attract the consumer,and creating an environment where weall want to spend time.”20

Predicting future space of F&B within retaillocations has not proved easy. There is nodoubt that F&B will continue to increase in importance and provide a crucial elementin drawing visitors to shopping locations.However few are able to accurately predictfuture F&B floorspace.

With the branded restaurant marketpredicted to grow from £16.4 billion in 2013to £22 billion in 2018, this will increasecompetition among the larger chains andwill increase the need to adapt the offeraccordingly. Growth is predicted to comethrough both physical expansion and positivelike-for-like performance. In addition, thegrowth in the branded market will meanlarger chains will increase market share at the expense of independent operators as well as increasing the ability to dictate more favourable lease terms. Thedevelopment of smaller chains howevershould not be forgotten. The F&B market isalways re-inventing itself and new brandsare constantly being developed; Giraffe, Las Iguanas and Côte are now visible incentres across the country and all are under10 years old. More recently the likes ofMEATliquor has moved on from operating a single pop-up unit in London to soon to beopening a 5,000 sqft unit in Trinity Leeds.

The introduction of more up and comingoperators into shopping centres is notwithout its pitfalls. There have been anumber of instances in which successful

“We believe the answer lies in three key areas –a really detailed understanding of the consumer,providing the right services to attract the consumer, and creating an environment where we all want to spend time.”Andrew Smith Head of Investment in Portfolio Management, British LandSource: Whiteley Shopping Centre Investor Day presentation, British Land, 19 September 2013

The growth in thebranded market willmean larger chainswill increase marketshare at the expenseof independentoperators.

20 Families get a taste for fast casual dining,Marketing Week, (02 August 2012).

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food operators within London were unableto replicate that success in other parts ofthe country. This reinforces the general viewamong respondents that London exists as aseparate market from the rest of the UKwith a different behavioural profile withregard to F&B. These considerations arelikely to remain a key factor for shaping thefuture of F&B within retail.

The overall question posed in the title ofthis report: ‘Is food and beverage asolution?’ seeks to address whether F&B canreduce the number of voids in centres andshape the future of the industry goingforwards. The answer to this rather dauntingchallenge is no. If the question is rephrased

ask whether F&B can contribute to thefuture shape of the industry, then theanswer is a resounding yes.

Finally, it should be noted that many of the major developments involving F&B,are yet to establish themselves.Consequently it may be a few years beforewe will be able to accurately examine theimpact of the recent boom in expansionof F&B within retail. There is currently astrategy of ‘wait and see’ among manylandlords. As one major landlordcommented: “We’re all still learning.”

The key to a successful F&B offer isthrough understanding who is visitingthe centre and tailoring it to therequirements of the consumer.

12. AppendicesAppendix 1: Case studies

Silverburn Shopping Centre,Glasgow

With 1,500,000 sqft of space, the Silverburn Centre is a £350 millionpurpose-built retail development which saw a 14million footfall lastyear. The centre opened in October 2007 and has been successful inattracting a host of flagship stores including Marks & Spencer, Next and Debenhams as well as a number of big shopping and food brands.

Hammerson — along with Canada PensionPlan Investment Board — acquired theshopping centre after its previous owner,Retail Property Holdings Ltd, went intoadministration two years after the centre opened.

Currently, the F&B offer in the SilverburnCentre is a mix of in-store cafés — in Debenhams and Marks & Spencer — and fast casual chain restaurants andcoffee shops, such as Nando’s, Wagamama, Yo! Sushi, Costa and Frankie & Benny’s.Extended opening hours are available in some of the restaurants where someremain open until 10pm, while the centre closes at 9pm.

Silverburn plans to add to its F&B andleisure offer with a £20 million 120,000sqft extension, expected to open in late2014 / early 2015. It will be anchored by a 50,000 sqft cinema. The centre isadding nine new restaurants includinga 10,000 sqft Cosmo (a pan-Asianrestaurant), a 6,800 sqft TGI Friday’sand a 3,600 sqft Pizza Express.

With the extension, Silverburn Centre is hoping to expand upon its already-improving performance:

• footfall was up 32% last December 2013compared to the previous year

• it is hoping to expand on this furtherwith their new leisure facilities

• so far, £750,000 of £1 million annualrental fees have been negotiated.

The expansion of the Silverburn Centre ispartly due to their intention to be seen as‘a true day-out alternative to Glasgow citycentre’ and to improve upon its currentaverage dwell time of 93 minutes,according to Martin Plocica, Director UK Shopping Centres at Hammerson.Upon its acquisition, Phillipa Zieba ProjectDirector for Hammerson stated they were:

“Confident that Silverburn can offer more in terms of new stores and thepotential for a leisure offer... We areinvesting for the future — and it willdefinitely be money well spent”.Source: £20 million makeover for Silverburn shopping mall,Evening Times, 16 February 2013

Silverburn F&B offering• Auntie Anne’s• Chocolati• Costa Coffee• Debenhams• Frankie & Benny’s• Greggs• Handmade Burger Co.• La Tasca• M&S Cafe• Nando’s• Pizza Hut• Prezzo• Starbucks• Thorntons• Vom Fass• Wagamama• Yo Sushi

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St Georges,Harrow

Located in Harrow, 20 minutes north-west of central London, St George’s Shopping Centre (owned by Redefine International)comprises a 212,000 sqft centre with 40 units across three levels of retail and leisure, designed in the 1980’s and opened 1996.

St George’s has traditionally been viewedas the secondary scheme within Harrowtown centre and was operating as asecondary shopping scheme with a poorlyperforming, disjointed A3 / leisure offeralong with an acute lease expiry profile.

The owners developed a long term strategyto reposition the centre to increase theasset value and create a successfulsustainable product from a rentalperspective, while broadening theconsumer appeal by creating the leisureand retail destination of choice within thewider catchment. The strategy includedplans to increase and enhance the A3 offer.

In addition to increased income, theredevelopment has created a shoppingand leisure destination that has enhancedthe overall experience for visitors toHarrow town centre while positioning St George’s as a leisure destination in its own right.

Results achieved to date include:

• an increase of 4% in net internal area(NIA) dedicated to leisure

• improvements and changes in relation tothe A3 category, enhancing the overallleisure offer for customers with a greatchoice of casual dining, which the townwas previously lacking

• increase in the number of screens atVue has resulted in more choice andgreater appeal for visitors

• improved dwell time.

The consumer and operator feedbackduring the refurbishment and repositioninghas been very positive:

“Our newly rebranded Pizza Express store at St George’s in Harrow has been a huge success and is now one of the stars of our portfolio” — Pizza Express.

“The opening of the restaurant in St George’s has far exceeded ourexpectations…” — Nando’s.

Source: Redefine International website

St. George’s F&B offering• Esquires Coffee• Frankie and Benny’s• McDonalds• Nando’s• Pizza Express• Prezzo• Starbucks• Thorntons

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Woking Shopping,Woking

With over 150 individual units, Woking Shopping comprises of over1,000,000 sqft of retail, leisure and office space. Woking Shoppingconsists of Peacocks Shopping Centre, opened in 1992 and WolseyPlace; a 1970’s development extensively refurbished in recent years.Anchoring both centres which currently attract circa 15 million annualfootfall are Debenhams, Sainsbury’s, Boots and Primark.

The Peacocks and Wolsey Place have beenrebranded together as ‘Woking Shopping’,a move welcomed by traders and shoppersalike. Considerable public realmimprovements have transformed theenvironment of the town centre and whenin 2011 the new Jubilee square officiallyopened, the new entrance to WolseyPlace has an elliptical glass frontageincorporating Pret A Manger among others.A café culture feel has been achievedthrough the arrangement of seating in ashared and well used public square.

The management team has been carefulto ensure a range of catering offers areavailable to both centres. The Peacocksoffers a mix of coffee shops and Quickservice — such as Costa and Millie’s Cookies— and fast casual dining — such asChopstix, Café Rouge and Azzuro. Recentintroductions to Wolsey place haven beenPrêt and Patisserie Valerie.

The Peacocks provides an all-day shoppingexperience and to improve dwell time hassignificantly refreshed the food court offer.

It is exploring ways to provide additionalfamily dining options to link to theextensive leisure offer of two theatresand six cinema screens.

Tim Buckley, Asset Manager atMoyallen Shopping said:

“Upgrading a scheme effectively is aboutidentifying the changing needs of thecatchment and for us bringing in CaféRouge was an opportunity to prove thata better food and beverage offer wouldbe supported in Woking. Café Rouge isperforming very well and this has given usthe confidence to introduce much betterquality F&B offers and more importantlythe confidence from the operators to lookat the town centre for new sites. As proofof the success we have added Pret andPatisserie Valerie and have plans foranother four or five F&B units to helpfurther develop the twilight economy.”21

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21 Breathing new life into secondary malls,Retail Week, (06 September 2013).

Woking Shopping F&B offering• Azzuro• Baskin Robbins• Burger King• Café Americano• Café Rouge• Chopstix Noodle Bar• Costa Coffee• Debenhams• El Mexicana• Greggs• Grill & Go• KFC• Le Papillon Patisserie• Love Coffee• McDonald’s• Millies Cookies• Muffin Break• Patisserie Valerie• Pret A Manger• Shakeaway• Spud-U-Like• Starbucks• Subway• Zest Juice Bar


Intu LakesideShopping Centre,Essex

Located in Thurrock, Essex, the Lakeside shopping centre is the seventhlargest in Britain with over 1,350,000 sqft of floorspace. An out-of-townshopping centre, Lakeside was opened in 1990, though it was rebrandedas ‘Intu Lakeside’ in 2013. To ensure the centre remained competitivewith the Bluewater centre across the Thames, it has undergone multiplerenovations and upgrades.

In 2005 the interior was refurbished and in 2007 a market area which adjoins thecentre was refurbished and rebrandedas ‘The Boardwalk’.

The food offer at Lakeside is varied, with39 restaurants and cafés within the centreand Boardwalk. 20 of these are throughoutthe main centre, most of which are cafésand snack operators, such as Costa andMillie’s Cookies. There are 8 restaurants inthe food court offering fast casual dining,such as Pizza Express and Taco Bell.Restaurants in the adjoining Boardwalkoffer bistro type venues, such as GourmetBurger Kitchen and Bella Italia.

After the success of transforming theBoardwalk there were two plans in place toupdate Lakeside’s F&B offer, the first ofwhich is a £9 million redevelopment of thefood court. Already underway, the upgradehas seen new interiors and some newvendors, such as Chopstix and Ed’s EasyDiner added. The final phase, expected tobe finished in early 2014 is the remodel ofindividual F&B outlets and the addition ofanother as-of-yet unnamed restaurant.

As well as the food court, Lakeside plans toadd a £180 million, 438,000 sqft extensionto the centre, expected to be finished by2017. The extension will be designed tolook like a town square and be built nearthe existing Vue cinema, which will also beexpanded. Though retail will possibly beused for some of the space, it has beendesigned to be primarily leisure-based,with potentially 30 new restaurants andcafés added, as well as a hotel.

The expansion comes after publicconsultation carried out by Intu discoveredthat 82% of respondents said that theywould spend more time at the centre ifadditional leisure activities were available.The centre is looking to increase the dwelltime of its customer base, which alreadyattracts a 25 million annual footfall, and become a day-long destination.

Chief Executive of Intu, David Fischel stated:

“Our aim is to increase footfall, dwell timeand spend at our centres, which will drivelong-term value creation for shareholders.”

Source: Properties plc: Interim management statement,Bloomberg, 05 November 2013

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Intu Lakeside F&B offering• Bella Italia• Boost Juice Bar• Burger King• Café Giardino• Café Rouge• Café Nero• Chopstix Noodle Bar• Cinnabon• Costa Coffee• Ed’s Easy Diner• Café Giardino• Giraffe• Gourmet Burger Kitchen• Greggs• KFC• La Tasca• Las Iguanas• Love Coffee• M&S Kitchen• McDonald’s• Miller & Carter• Millie’s Cookies• Nando’s• Pizza Express• Pizza Hut• Pret A Manger• Sainsy’s Pie and Mash• Shakeaway• Spreads Café• Spur Steak & Grill• Starbucks• Strada• Subway• Sweets From Heaven• Taco Bell• Wagamama• Wimpy• YO! Sushi• 360 Champagne & Cocktails


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Appendix 2: List of contributors

Thank you to the following for their valuable contribution to this project:

Peter Backman Horizons

David Bell Savills

Helen Carr Intu

Nicole Carter Path Intelligence

Sharon Cawthorne Wagamama

Alan Cochrane New River Retail

Sarah Fox Hammerson

Nick Gregory Redefine

Duncan Hall Savills

Ken Higman Coverpoint Catering Consultancy

Allan Lockhart New River Retail

David Lyons O&H

Gordon McKinnon Intu

Peter Martin CGA Peach

Tom Meager Associated British Foods

Julyan O’Connor Pret a Manger

Kieran Pitcher Gondola Restaurant Group

Helen Rainsford WM Morrisons

Romin Tehrani Path Intelligence

Andrew Turf Land Securities

Andrew Varley Next

Tom Whittington Savills

Mark Wingett M&C Report

Thank you to Coverpoint Catering Consultancy for the provision of some imagesused in this report.


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Appendix 3: Bibliography

£20 million makeover for Silverburn shopping mallEvening Times, (16 February 2013)

A view from the hill: emerging trends in foodservice and opportunities for shopping centresJonathan Doughty, Coverpoint, (11 September 2012)

Analysis: Birmingham’s Bullring shopping centre 10 years onRetail Week, (06 September 2013)

Analysis: Breathing new life into secondary mallsRetail Week, (06 September 2013)

Analysis: Out-of-town locations top the charts for retailersRetail Week, (22 February 2013)

Behaviour change and the temporal ordering of eating practices: a UK-Spain comparisonSoutherton D., Díaz-Méndez, C. and Warde A., International Journal of the Sociologyof Agriculture and Food 19 (2012)

Beyond Retail: Redefining the shape and purpose of town centresBCSC, (29 November 2013)

Branded restaurant market to reach £22bn by 2018Hospitality & Catering News, (27 June 2013)

Business profile: GiraffeBig Hospitality, (05 September 2013)

Casual dining — mid-life crisis?Peach Report, (11 September 2013)

Consumer eating out trendsHorizons, (12 April 2012)

Counter service gains casual credibilityBig Hospitality, (04 September 2013)

Destination dining quarter planned for Newcastle shopping centreBig Hospitality, (18 June 2013)

Eating out is the new staying inMarketing Week, (19 December 2013)

Families get a taste for fast casual diningMarketing Week, (02 August 2012)

Fast food evolutionFoodservice Consultant Magazine, (August 2013)

Foodservice goes into positive growth but operators express concern overstaff recruitment and retentionHorizons, (19 March 2014)

Four new restaurant signings for Gloucester Quays’ extensionBig Hospitality, (28 May 2013)


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Interview for the programme ‘You & Yours’BBC Radio 4, (First Broadcast 27 September 2013)

Intu Properties plc: Interim management statementBloomberg, (05 November 2013)

John Lewis works up restaurant conceptPeach Report, (16 September 2013)

Lakeside — a retail coming of ageRetail Week, (25 March 2011)

Land Securities — Investor tour of Trinity Leeds(11 April 2013)

Local pubs diminishing as restaurants favoured for socialisingBig Hospitality, (04 October 2013)

New F&B lettings at St George’sShopping Centre, (07 October 2013)

New River Retail Annual ReportNew River Retail, (2013)

Prezzo, Richoux and The Restaurant Group increase shopping centre footprintBig Hospitality, (22 May 2013)

Property: Dining out on European RetailJP Morgan Cazenove, (12 March 2014)

Provenance key for foodservice operators as British food grows in popularityBig Hospitality, (04 October 2013)

Pulling in the promiscuous dinerPeach Report, (17 June 2013)

Putting in a better kitchenPeach Report, (12 December 2012)

QuickBite surveyHorizons, (July 2012)

Renaissance at BellaPeach Report, (23 April 2013)

Retail and Leisure SupplementEstates Gazette, (Spring 2014)

Retail vacancy rates still ‘stubbornly high’Peach Report, (11 September 2013)

Rising food costs hitting restaurants and cafes hard, with many paying more forfood than in rent or ratesThis is Money, (04 May 2013)


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Shape shifters: What are the next big brands and trends for the restaurant sector?Big Hospitality, (22 July 2013)

Shopping centres emerge as must-have locations for expanding restaurant conceptsBig Hospitality, (02 March 2013)

Social media in shopping centres: the issues, the lessons, the opportunitiesBCSC, (07 March 2012)

St George’s Shopping Centre HarrowRedefine International, (Autumn 2013)

Taste of the nation reportDeloitte, (2012)

The Future ArchiveTelford Shopping Centre

The Grimsey ReviewThe Vanishing Highstreet, (2012)

The new food courtQSR magazine, (December 2013)

The rise and rise of multi-channel retailingBCSC, (2012)

Top 10 food trendsIFT, (April 2011)

UK casual dining market dominated by Nando’sCompaniesandMarkets.com, (14 January 2013)

UK sees 15% rise in independent coffee shopsHospitality & Catering News, (04 December 2013)

Upwardly mobile?Peach Report Brand Track, (October 2012)

What can catering do for retail?Hammerson, (2011)

Whiteley Investor Day presentationBritish Land, (19 September 2013)

Young diners boost the eating out marketThe Morning Advertiser, (22 July 2013)


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Appendix 4: Glossary of terms

Term Definition

A1 Shops which are used for all or any of the following purposes:

(a) for the retail sale of goods other than hot food(b) as a post office(c) for the sale of tickets or as a travel agency(d) for the sale of sandwiches or other cold food for consumption

off the premises(e) for hairdressing(f) for the direction of funerals(g) for the display of goods for sale(h) for the hiring out of domestic or personal goods or articles(i) for the reception of goods to be washed, cleaned or repaired.

Where the sale, display or service is to visiting members of the public.

A2 Financial and professional services with use for the provision of:

(a) financial services(b) professional services (other than health or medical services), or(c) any other services (including use as a betting office) which it is

appropriate to provide in a shopping area.

Where the services are provided principally to visiting members ofthe public.

A3 Food and drink: for the sale of food or drink for consumption on thepremises or of hot food for consumption off the premises.

A4 Drinking establishments such as public houses, wine bars or othersuch establishments.

A5 Hot food and takeaway: for the sale of hot food consumption intendedfor consumption off the premises.

Compound Compounded Annual Growth Rate (CAGR) is a method used to provideAnnual Growth a constant rate of return over a particular time period. CAGR reducesRate (CAGR) the effects of variability found in periodic returns and is particularly

useful to compare growth rates from different data sets such asrevenue growth of companies in the same industry.

Price: Non-members £199

ISBN: 978 1 897958 61 2

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t: 0207 227 4480e: [email protected]: www.bcsc.org.uk

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Food andbeverageA solution forshopping centres?

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