Designer outlet centres have had to offer more than just retail to weather the economic storm.
The UK’s designer outlet sector - the oldest in Europe - is something of a curate’s egg. The moniker has been used as a broad brush to cover everything from tourist-themed speciality outlets to premium centres. The best known is luxury shrine Bicester Village, which has become a global draw.
While the channel has become increasingly popular among retailers looking to sell off-season products within a brand-controlled environment, there has been little new development over recent years. Recently that changed, first with London Designer Outlet [LDO] which opened in Wembley, north London, last year and the announcement of the upcoming Resorts World outlet, adjacent to the NEC near Birmingham.
LDO is sited immediately across from the national stadium and Wembley Arena and - in a significant nod to the current trend - includes a high level of food and beverage, plus a cinema. The NEC project is even more multipurpose, featuring a casino, banqueting and conference centre, a four-star hotel and 11-screen cinema alongside 60 retail, food and beverage units. It will open in spring 2015.
Major extensions have also been approved at Ashford Designer Outlet in Kent and Swindon Designer Outlet, while Land Securities is in talks with the owners of The O2 in Greenwich, London, to open a luxury designer outlet at the venue. The company has signed a six-month exclusivity agreement with entertainment firm AEG Europe to discuss the options to jointly develop an area of the site, including around 200,000 sq ft of retail space with as many as 110 stores, plus bars and restaurants.
AEG and Land Securities hope to attract luxury retailers, indicating they may be about to try and rival high-end Bicester Village near Banbury in Oxfordshire, 62 miles west of London, which has been a phenomenal success and remains a unique high-end outlet centre in the UK.
Ailish Christian, portfolio director, Southeast and London at Land Securities, says while talks are at an early stage, the developer is excited about prospects for such a scheme, which reflects the company’s wider belief in the synergies between leisure and retail.
“At Gunwharf Quays [in Portsmouth] we have around 90 stores to 30 restaurants and cafes and we’d probably be looking at a similar mix in Greenwich,” says Christian. “Our feeling is that shoppers come to designer outlets for a day out and the food and beverage offer is a vital part of that experience, and encourages spend and attractiveness of the schemes.”
Mark Disney, executive director for shopping centre leasing at CBRE, says designer outlets have not been immune to the polarisation that has taken place in the mainstream shopping centre sector. The smaller centres in less affluent catchments have struggled, with the closures of Freeport Scotland, Rathdowney Shopping Outlet in Ireland, Whiteley Village in Fareham (reopened in May 2013 as a shopping centre) and K Village in Kendal, Cumbria, with the latter in administration for a year without a buyer. “The top 10 centres, with Bicester Village the standout project, are where the major brands want to be, which means there has been some consolidation as the top centre fashion brands look for better rather than more locations,” says Disney.
Christian notes that this is attracting new types of fashion retailers, pointing to signings in the past year at Gunwharf Quays of the likes of Original Penguin, Ugg Australia, All Saints and Tommy Hilfiger. “Many of the brands see outlet as an additional channel and there is not huge overlap between the buyer of full-price in central London and the buyer at an outlet centre,” she notes. “Some of the long-established brands are also continuing to see strong sales growth - the likes of Polo Ralph Lauren, Nike and Ted Baker.”
This is an interesting point. While channels to sell off-season product have always existed, a raft of online channels have flourished, including eBay’s Fashion Outlet marketplace, retailers’ own direct online sales channels, job lot specialists, plus retailer TK Maxx. To compete with those channels, the priority for designer outlets has become to create experience, which goes some way to explaining why the premier destinations are performing best.
In the UK the most prominent centre is Bicester Village, which has become a beacon for luxury brands and the international visitors who pursue them. Scott Malkin, chairman of owner Value Retail, says 70% of visitors last year were from outside the EU and that the centre continues to evolve to capture their spend. Critical to the shift is “meeting long-haul visitor expectations”, he says, which has seen a major upgrade in the food and beverage offer and latterly upgrading of some of the stores. “It’s important to understand that outlets are not about dumping excess stock,” he insists. “The types of shoppers that come to Bicester are also visiting Bond Street, Harvey Nichols, Harrods and the like, so the brands have to put their best foot forward. How that is manifesting itself is in luxury brands treating these outlets as flagships and the work done by Burberry and Prada demonstrates that way of thinking.”
The newest addition to the UK designer outlet sector is LDO, and by Easter it should be 86% let with around three quarters of the space open, says James Saunders, chief operating officer at owner Quintain Estates. The scheme includes sports lifestyle and high street fashion - including the first H&M outlet in the UK - and occupies something of a unique position in that it is adjacent not only to Wembley’s stadium and arena but also a large residential tract. It is also within a few miles of Brent Cross and Westfield London.
The 350,000 sq ft centre opened on October 24 last year, with anchor retailers including Nike, GAP, Clarks and Marks & Spencer, plus an extensive line-up of restaurants and a nine-screen Cineworld. Since opening, Superdry, H&M and LK Bennett have been added to the line-up. Saunders believes the opportunities to offer short leases and share sales data are vital in helping retailers trial and optimise their presence in an outlet, while acknowledging that establishing it as a destination will take time.
“So far the marketing has mostly been local, but from Easter this will start to target a wider catchment, now we have the offer to support it,” he says. “It’s telling that fashion retailers are clear about the role of outlet, given our proximity to two major mainstream malls. The mix is also important. Our homewares retail has developed, as has accessories, while food and beverage is very important in increasing dwell.”
These openings throw up the obvious question of where else new outlets might open. Perceived gaps in the Midlands and in proximity to London are being filled with Resorts World and LDO respectively, plus potentially The O2. There could be an opportunity between the M3 and M23 and the more affluent elements of the Southwest corridor, while similarly the Northeast and the Norwich area are geographical gaps, but may not have sufficient catchment.
“The latest wave of new schemes and extensions probably reflects the greater confidence in the property market as we move out of austerity,” says Christian. “And certainly outlet performance over the past five years points to this as a very resilient retail sector.”
Malkin adds that the “department store” model is at the heart of this success and that the ability to refresh the merchandise mix, tenants and environment is something available to department store operators but not mall owners. “It’s critical,” he says.
“For the consumer it’s about that constant upgrade and for retailers it’s vital to think of how they build and support their outlet proposition in order to build and support their brand.”