Offering plenty of space for both retail and logistics uses, retail parks are well-placed to offer convenience and experience. Historically, this asset class has seen lower vacancy rates than the GB average, even following the onset of the COVID-19 pandemic where they continued to be resilient. Between May 2019 and 2021, footfall in retail parks only fell by 1%, compared to shopping centres and high streets which saw footfall decrease by 27% and 36% respectively during the same period (Source: Pragma UK).

In recent years, many retailers have consolidated their estates, moving away from high street locations in favour of retail park sites. As with many retail trends we have observed recently, this was accelerated by the pandemic since retail parks were able to offer a more Covid-friendly retail experience. Brands were likely to keep retail park stores open over stores on high streets and in shopping centres, where social distancing was harder and stores were housed in enclosed spaces.

Despite an overall growth in vacancy rate at retail parks, 5.7% between 2016-2021, different categories of retail park have performed differently in the last five years. How have these different types of parks been able to weather changes in the GB retail and leisure sectors? How are they positioned to serve the future of retail?

A diverse asset class

The most common type of retail park in Britain, making up 44.4% of all parks, is centred around a food offer. These locations typically contain a supermarket alongside fast food and café outlets. Between 2016 and 2021, food-focused retail parks have seen vacancy rates lift by 3.6%, compared with the overall figure of 5.7% for all retail parks, which points to their continuing relevance even as retail spend in other categories has changed. Cafes and Fast Food have seen an increase of 322 sites between 2016-2021. Grocery has seen an increase of 263 sites in this period. The categories that tend to be prevalent at retail parks were also the categories that weren’t as impacted by the migration of spend to online channels.

The second most common type of retail park has a predominantly home and garden-based offer, with a higher mix of furniture and DIY stores and garden centres. 13.9% of retail park units are occupied by homeware stores, making them the most prevalent category across this location type. Between 2016-2021, homeware stores only saw a -21 change in units, reflecting the continuing success of retailers such as Carpetright, Dreams and Dunelm, and the growth of brands such as Home Bargains, which opened 78 stores at retail parks in this period. Home and Garden sales grew significantly during the pandemic, with consumers spending more time at home and less money on overseas travel, which led to a massive rise in home improvement during lockdowns. It is important to remember, too, that stores in this category were marked as ‘essential’ and therefore were able to trade when others weren’t.

10.9% of retail park locations are based around fashion, considered a higher-risk category across retail due to spend moving online and CVAs, closures and administrations for major retailers, leading to a 9.6% increase in vacancy rate for these parks in the five years to 2021. These sites were strongly affected by the closures of Outfit (Arcadia’s concept which hosted its brands under one roof), Accessorize, Bratano Footwear and Laura Ashley.

Leisure-focused retail parks have also seen a decline, with a 9.0% increase in vacancy rate in the 2016-2021 period. Restaurants lost a net 145 sites in this period. This was driven by the closure of 93 Frankie & Benny’s sites, but offset by Nando’s who opened 33 sites. Operator The Restaurant Group announced in 2020 that it would close a large number of its Chiquito and Frankie & Benny’s sites due to severely impacted trade during the pandemic, with a number of these sites situated at retail parks.

Looking to the future

Many brands in the retail park space have performed well over the pandemic, being well-placed both in location and in offering to cater to pandemic-driven consumer trends. In terms of brand presence, Pets at Home is the most prevalent retail park brand, with 340 units as of 2021. An increase in pet adoptions over lockdowns contributed to a turnover of over £1bn. Since 2016, some retailers have entered the retail park space for the first time, and as of 2021 have 10 or more sites within retail parks. This includes Buzz Bingo, Taco Bell and Flooring Superstore, which could be joined by other brands looking to offer physical showrooms and online fulfilment facilities to support a multichannel strategy.

Retail parks have long been hubs of convenience, often boasting easy access by car, free parking, longer opening hours and large units allowing brands to showcase more of their product range. With spend moving online, physical stores have had to focus on offering a level of convenience and experience that cannot be replicated on the web. Retail parks can make good use of their large format, with stores acting as click-and-collect hubs and showrooms where customers can see and test products before purchase. It has become clear that online retail is here to stay and physical stores will form part of a multichannel sales strategy, helping to increase visibility, build brands and engage with consumers.

Domestic and international investors alike have been eyeing retail parks to add to their portfolio, due to their performance in recent years. Investors such as British Land and Columbia Threadneedle have started buying back into the market, boosting their retail park portfolio. The most attractive sites have been those with a food store as an anchor, but also sites that can provide an alternative end use should retail no longer be viable, for example for residential or logistics uses. The latter could prove especially relevant: Cushman & Wakefield have reported that the UK could run out of logistics space within a year, with e-commerce and supply chain disruption taking available warehouse space to its lowest level since the property agent began tracking the sector.

According to a recent survey by Auxadi, 57% of real estate investors across the UK, Europe and North America expect food-anchored retail parks to bounce back the quickest in terms of upturn in valuations by 2023. UK respondents predominantly (63%) backed retail parks to recover quickest. With occupiers and investors banking on retail parks, we expect to see further investment into the future of these assets, particularly at food- and home-led locations.

Our 2022 update: repurposing and relevance

Our latest analysis on H1 2022 shows that retail park vacancy rates are improving. Retail park vacancy fell by 1.3% from H1 2021 to H1 2022, bringing the current figure to 10.2%. (This is still 2.3% above the pre-pandemic low of 7.9% in H1 2019). Retail parks continue to benefit from their convenience of access, free parking provision and ability to support online order fulfilment.

Again, performance varies across regions: in H1 2022, retail parks in Greater London performed worse than any other location type and region in terms of percentage net change in units. Investors are running down leases and closing stores as part of plans to repurpose these assets for residential and other uses, which are potentially more profitable in the face of retail oversaturation.

Since mid-2021, the key brands growing in retail park occupation are Tim Horton’s, Home Bargains, The Gym, Greggs and Aldi. Canadian coffee chain Tim Horton’s is continuing to strengthen its UK presence, including at Chester Retail Park where it has situated itself within throwing distance of four supermarkets (one being an Aldi), a Home Bargains and a Pure Gym (which is one our top 10 growth brands for retail parks). Considered location strategy like this could support longevity and overall health within retail park assets by ensuring a relevant, cohesive retail offer.