Leisure: responding to an experiential crisis - UK Leisure: the deprived Consumer, the embattled Occupier, the brave Investor - Knight Frank
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UK Leisure: the deprived Consumer, the embattled
Occupier, the brave Investor
Leisure:
knightfrank.com/research
responding to an
experiential crisis
Retail News: Issue 12
R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S
INTRODUCTION KEY MESSAGES
Leisure has risen up the agenda across the board. Both For all the opportunities, the Leisure sector still faces
Fun. Fresh. Exciting. Vibrant. New. Cool. Diverse. Versatile.
for consumers, desperate for post-lockdown fun and huge generic challenges. One of the largest and most
Evolving. Innovative. Ten adjectives that are the embodiment of the
entertainment. And for landlords, developers, planners and immediate is labour, in terms of both availability and cost.
Leisure sector. And ten adjectives that all destinations, town centres
local authorities looking to inject life and vitality into their Hospitality staff shortages are estimated to be in the order
or otherwise, are aspiring to be. You do the maths…
assets and town centres. of 200,000, while progressive increases (+44% since 2012) in
the national minimum wage continue to weigh heavily on
industry profitability.
Leisure spend was decimated during the pandemic (2020:
L eisure, in its wonderful array of
guises, is already a significant cog
change within the Leisure market. As
much by default as design, Leisure
had its cashflow cut off for the best part
of a year. As an investment, Leisure has
-53.6%), but is rebounding very quickly now that restrictions
have eased (2021f: +40.6%, 2022f: +36.0%). Spending Expect a fresh wave of innovation in the Leisure sector
in the wheel of most successful towns operators were forced to reengineer their sometimes suffered from being perceived
propensities / priorities have been redefined and Leisure as an unlikely by-product of the pandemic. In the case of
and locations across the country. Expect business models during the pandemic, as something of a “poor relation to Retail”,
spend is far less discretionary than it is perceived to be. the more traditional Leisure ‘big box’ sectors, this is likely
this role to expand, multiply and diversify leading to diversification, wider embrace or sitting in the “too hard to understand”
to take the form of evolution, value-added services and
as we embark on a fresh wave of centre of technology, adoption of a more proactive specialist sector camp. Like it or not,
diversification, rather than revolutionary change. Amongst
regeneration and asset repurposing in digital stance and maiden ventures into the investment decisions are going to be
the ‘newer breed’, we are likely to see a whole host of
the wake of 18 months of COVID-induced multi-channel arena. Now the dust is slowly infinitely more complex in a post-COVID
COVID-19 may actually have thrown up considerable new brands, formats and concepts.
soul-searching. starting to settle, these are all initiatives world. Large amounts of capital will
expansion opportunities for Leisure operators. Town centre
that can be nurtured and developed going inevitably flow towards predictability of
vacancy rates have hit a new high (15.8%) and include
At the same time, few sectors within the forward. All potentially exciting growth income, but the rest will have to be very
high proportions of ex-department store and MSU space.
wider economy have experienced the avenues, albeit ones that also bring discerning and much more forensic than it
Landlords are increasingly receptive to Leisure tenants and As an investment, Leisure may lack the transparency
scale of devastation experienced by Leisure fresh challenges, added complexity and has maybe been in the past. Leisure is very
are taking a more progressive view on covenants. of other use classes and its ongoing affiliation with
during the pandemic. Always first into incremental cost. much part of this wider mix and fortune
Retail is questionable. But since 1981, Leisure Parks
lockdown(s), always last out. And with a may well favour the brave.
have considerably out-performed virtually every other
more stringent straitjacket of restrictions
mainstream property asset class, delivering an annual
than virtually any other sector. With false The consumer is king in all of this. There
Fun is what battle-weary Significant other opportunities have also arisen: the average total return of +11.2% (All Property +8.6%, All
hopes and promises along the way, most is an old adage in Retail that the key to
consumers crave as we pandemic has prompted greater embrace of technology and Retail +8.0%).
notably the government’s ‘Eat Out to Help succeeding is simply giving customers what
many Leisure operators have made their maiden voyage into
Out’ scheme. Tough does not even begin to emerge and move on from they want. Fun has been in desperately
the multi-channel arena. Many are now also in a position to
describe the plight of the Leisure market lockdown. Fun is what the short supply during much of the pandemic.
leverage “big data” for the first time and deploy it to strategic
since the onset of the pandemic. Leisure market excels at. Fun is what battle-weary consumers crave
means across marketing, range and location planning. Yields for Prime Leisure Parks are currently around
as we emerge and move on from lockdown.
7.00% (with Good Secondary Leisure Parks at 8.00%+ and
Nor can we be blind to Leisure’s multitude Fun is what the Leisure market excels at.
Secondary / Tertiary Leisure Parks at 10.00%+). Prime
of ongoing challenges. Some of these are
yields have moved out by +175bps since March 2020 and by
self-inflicted, such as F&B over-expansion Judge Leisure on what it can bring, rather We would be delighted to discuss any issues
The tap will not be turned off on these initiatives as markets +225bps since their 4.75% peak in early 2018. This easing of
and a legacy of unaffordable rents in some than its performance in 2020. Leisure spend raised in this report with you.
settle. On the contrary, they offer scope for significant price has inevitably opened up potential counter-cyclical
locations – and the spectre of Private Equity was understandably decimated last year,
development and incremental growth going forward. buying opportunities, for the right stock.
ownership still weighs heavily on some but is already rebounding far more quickly
However, harnessing this potential is rife with complexity
segments of the market. Other challenges than the doomongers predicted. It was a
and carries both risk and cost.
are more generic, chief amongst them staff growth market before COVID-19 struck and
issues (shortages and wage increases) and it will remain so when the pandemic fully
supply chain pressures. These are major subsides. The notion of Leisure spend being
challenges that the Leisure industry must highly discretionary and therefore volatile
F&B remains the standard-bearer for the whole Leisure
not merely react to, but rather must address in times of crises was questionable before,
market, accounting for ca. 65% of Leisure spend. There are
head-on. now it seems highly anachronistic.
still residual structural issues in the F&B market, not least
STEPHEN SPRINGHAM ongoing PE ownership and a legacy of over-expansion / over-
Paradoxically, the pandemic has also Only a brave real estate investor would PARTNER – HEAD OF RETAIL & LEISURE RESEARCH
+44 20 7861 1236 supply in some markets, coupled with unaffordable rents.
proved a catalyst to exciting and positive consider an asset class that has effectively STEPHEN.SPRINGHAM@KNIGHTFR ANK .COM
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CONTENTS
Page 6 Page 24 Page 42 Page 58
LEISURE DASHBOARD F&B: SUB-SECTOR BIG BOX LEISURE – FOCUS ON ESG IN
SUMMARIES THINKING OUTSIDE… THE LEISURE SECTOR
Leisure Market, Consumer Market, Investment Market
Pubs, restaurants & coffee shops A myriad of sub-sectors with one common denominator – With ESG fast becoming a huge buzzword within the
they are fun. And fun has been in desperately short supply property industry, we take a look at how the Leisure sector
since the pandemic struck. is progressing the agenda as Environmental, Social, and
Page 8
Governance issues are increasingly pushed to the forefront
Page 28 for consumers, operators and investors.
LEISURE SPEND -
6 TA K E AWAY S F & B – P RO B L E M S O LV E R O R Page 44
PROBLEM CHILD?
NEW F ORMATS – Page 62
F&B remains the standard-bearer for the Leisure industry as
6 TA K E AWAY S
Page 9 a whole. It is a responsibility that has been tested to the core
INTERVIEW WITH LEGAL
during COVID and its component parts are at very different
& GENERAL INVESTMENT
“HELL HATH NO FURY LIKE A stages of recovery post-pandemic.
MANAGEMENT
CONSUMER DENIED” Page 45
One of the key attractions of the sector has been the attractive
First into lockdown, last out. With a more stringent
E M E RG I N G & E VO LV I N G : income it provides for investors. Occupiers typically take long
straitjacket of restrictions than virtually any other
Page 32 LEISURE F ORMATS F OR THE leases with built-in growth via indexation or fixed uplifts,
sector. Leisure has been through the mill since the onset of
NEW DECADE providing a long-term, growing income stream for investors
COVID-19 and consumer spending has dived accordingly.
F&B - OVER AND
But we believe it will recover far quicker and more The Leisure sector faces an exciting period post-lockdown.
UNDERSERVED MARKETS
sustainably than most economists are predicting. With consumers hungry for new and novel experiences and
Too many restaurants or not enough? Family dining overkill, landlords eager to diversify their retail offerings – there
Page 66
or lack of choice? The F&B proposition varies considerably has never been a more opportune moment for operators to
in towns and cities across the UK – and achieving the right unleash fresh formats and cool concepts to the market.
Page 16 INVESTMENT CASE–
balance and appropriate mix is a major challenge.
6 TA K E AWAY S
OBSTACLES &
OPPORTUNITIES
Page 54
Page 38 Page 67
INTERVIEW WITH JUMP IN
Page 18 BIG BOX LEISURE: TRAMP OLINE PARKS LEISURE INVESTMENT –
SUB-SECTOR SUMMARIES EMERGING FROM
It’s really about families having as much fun as possible
OBSTACLES VS OPP ORTUNITIES R E TA I L’ S S H A D O W ?
Gyms, gambling, cinemas and bowling doing indoor physical activity – “get off your screens and
For all its multitude of challenges, COVID-19 will ultimately onto the trampolines. Leisure has historically been inextricably linked to Retail,
also provide opportunity for the Leisure industry, with at best its cohort, at worst its poor relation. Why this bond
lessons learned and strategic initiatives borne of necessity may ultimately be loosening and what Leisure has to gain
morphing into long-term growth avenues. But it has also by achieving independent recognition and establishing a
thrown up considerable obstacles that must be navigated separate investment identity.
along the way.
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LEISURE DASHBOARD CONSUMER MARKET
LEISURE MARKET
64%/
64% 47% 28% 37%
£110.6bn +15.7% +3.5% +£3.9bn MISSED SOCIALISING IN
LEISURE VENUES
VALUE LEISURE VENUES AS ‘THIRD
SPACE’ (AFTER HOME/OFFICE)
REMAIN VERY WORRIED ABOUT
BEING EXPOSED TO COVID
POST-LOCKDOWN PUB
ATTENDANCE AMONGST 18-24
(AUGUST 2021) YEAR OLDS VS. 55-64 (JULY 2021)
Leisure venues – UK participation pre/post pandemic (July 2021) Pre Covid Post Covid
LEISURE INDUSTRY MARKET VALUE MARKET GROWTH PROJECTED GROWTH ADDITIONAL MARKET VALUE
(2019) (2015-2019) (2019-2025 INC COVID IMPACT) (2019- 2025F)
57%
Eaten out at restaurant
44%
Leisure industry market spend (2015-2025f) YoY change (RHS) Actual spend (LHS) Drunk in pubs/bars
52%
32%
140,000 60.0% 34%
FORECAST SPEND Used gym / fitness club
9%
40.6%
120,000 40%
36.0% 22%
Gambled in a venue
3%
100,000
Market value (£m)
20%
Annual change
10.4% 19%
80,000 5.4% 4.5% Played a social entertainment game
3.5% 4.3% 2.6% 3.0% 2.6% 7%
0%
18%
60,000 Used public leisure / swimming pool 7%
-20%
40,000 15%
Gone to cinema 10%
-40%
20,000
0% 10% 20% 30% 40% 50% 60%
0 -53.6% -60%
2015 2016 2017 2018 2019 2020E 2021F 2022F 2023F 2024F 2025F
INVESTMENT MARKET
63% £76bn +18.3% +19.9% £1.4bn/ 31.6m/
£3.9bn +33% 71% 10% 12% 454k
F&B MARKET SHARE OF LEISURE F&B MARKET VALUE 2019 (PRIOR GROWTH IN F&B MARKET (2015- GROWTH IN BOWLING MARKET
SPEND 2020 TO COVID ) 2019 PRIOR TO COVID) (2015-2019 PRIOR TO COVID) 2019 LEISURE INVESTMENT INCREASE IN PROPORTION PROPORTION OF PROPORTION OF LEISURE EXISTING LEISURE
VOLUMES (SINGLE ASSET LEISURE PROPERTY OF LEISURE LEISURE INVESTMENT INVESTMENT IN ‘OTHER FLOORSPACE / UNDER
VS. MULTI-ASSETS) INVESTMENT INVESTMENT IN PUBS / IN GYMS IN 2019 LEISURE’ IN 2019 CONSTRUCTION
SUB-SECTOR OVERVIEW MARKET SHARE – BY SUB-SECTOR 2020 *exc hotels 2016-2019 RESTAURANTS IN 2019 (SQ FT)
GAMBLING | 24% F&B | 63% Leisure investment volumes (2010 – 2021ytd) – exc. hotels
SUB -SE CTOR PROP O RT I O N MA R K E T 2 02 0 MAR K E T LON G T E R M
OF L E I SUR E VA L U E £ M I MPACT GROW T H
7.0% 20%
MA R K E T ( 2 019) ( 2 0 1 5 -2 0 1 9 ) Pubs/Restaurants Gyms Cinema Other Leisure No of Deals (RHS)
4,000 180
F&B 63% 76,756 -57.8% 18.3%
3,500 160
PRIME LEISURE PARK TARGET LEISURE 140
3,000
Gambling 24% 14,721 -31.5% 7.3% YIELDS (JUNE 2021) PROVISION AT MERRY
HILL SHOPPING CENTRE 120
Transactions
2,500
Gyms 4% 4,952 -61.7% 12.7% 100
2,000
£m
80
1,500
5m 151
Cinemas 1% 1,896 -75.6% 7.8% 60
1,000
40
Bowling 1% 320 -75.0% 19.9%
500 20
GYMS | 4%
Other 8% 11,953 -66.9% 13.4% OTHER | 8% BOWLING | 1% SQ FT OF LEISURE NO. OF LEISURE PARK 0 0
CINEMAS | 1% PIPELINE DEVELOPMENT SCHEMES IN THE UK 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
IN MANCHESTER ALONE
SOURCES: KNIGHT FRANK, MINTEL, LDC, PROPERTY DATA, PMA
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LEISURE SPEND - “HELL HATH NO FURY LIKE
6 TA K E AWAY S A CONSUMER DENIED”
First into lockdown, last out. With a more stringent straitjacket of restrictions
than virtually any other sector. Leisure has been through the mill since the onset
of COVID-19 and consumer spending has dived accordingly. But we believe it will
Consumer spending on Leisure was decimated in 2020 Leisure spend forecast to surge +40.6% in 2021 and a further recover far quicker and more sustainably than most economists are predicting.
(-54%), but is already rebounding strongly. +36.0% in 2022. Leisure was a growth market coming into WORDS: STEPHEN SPRINGHAM –
COVID-19 and is likely to emerge a growth market as the H E A D O F R E TA I L & L E I S U R E R E S E A R C H
pandemic subsides.
Leisure participation levels in July 2021 were already
substantially higher than in January 2021 and October 2020.
Consumer spending priorities have been redefined and
Perhaps only Travel and Tourism can January 2021 (although this was blurred even more limited window of opening
Leisure is now far less discretionary than it once was.
rival Leisure for the ignominy of being by the Tiers system that preceded it over than this.
the sector most cruelly affected by Christmas) and was enforced until 12 April.
Hospitality is finding its feet more quickly than
COVID-19. Lockdown V1 officially came But Hospitality was only able to open on an Limits on trading are one issue, wider
‘big box’ leisure, where the shackles of lockdown are taking
into force on 23 March 2020 and lasted “outside-only” basis on this date and had disruption another entirely. Incentives
longer to shake. Online has provided an outlet for many F&B operators
until 15 June 2020, but restrictions on to wait until 17 May to operate at anything such as the Eat Out to Help Out scheme
during lockdown. As restrictions ease, it is now both an
the Leisure market extended beyond like “normal” capacity. subsequently giving way to another
opportunity and challenge in equal measure.
both these time parameters. Hospitality period of full lockdown not only sent out
was ordered to close on 20 March and Over the last 18 months (March 2020 – contradictory messaging to consumers,
was not able to reopen in any shape or September 2021), the Hospitality sector but also gave rise to an operational “stop-
form until 4 July, a full three weeks after has had, at best, eight months’ trade. Even start” nightmare for Leisure operators.
“non-essential” retail. Other Leisure sub- then, this has been deeply compromised Throw in constantly shifting goalposts
sectors were not even afforded this luxury. by various restrictions. Other Leisure (e.g. the nonsense of consumers needing
The start of Lockdown V3 was officially 6 sub-sectors (e.g. Nightclubs) have had an to purchase “a substantial meal” in order
Value of the UK Leisure Industry 2015 - 2025f
Leisure spend (£bn) – LHS Annual growth (%) – RHS
140 60%
120
114.5 40%
110.6 111.6
107.8 108.4
103.2
100
Leisure Spend (£bn)
99.0 98.2
Annual Growth (%)
95.6 20%
80
72.2 0%
60
51.3
-20%
40
-40%
20
0 -60%
2015 2016 2017 2018 2019 2020E 2021F 2022F 2023F 2024F 2025F
Source: Mintel, Knight Frank
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to have a drink in a pub in December) and the market was worth only around £51.3bn. expectation is of a significant bounce-back Leisure typically encompasses 13 sub- based Gaming is the next largest Leisure
conflicting regional variations in England, In terms of context (for what it is worth), this year and next. sectors, with Hotels a separate and distinct spend category (2019: 7.4%, 2020: 10.5%),
Scotland, Wales and Northern Ireland, Leisure spending has not been this low
Leisure has not market in its own right (and therefore, followed by Online Gaming and Betting
Leisure has not experienced the perfect since the early 1990s. Leisure spend is forecast to surge by +40.6% experienced the perfect excluded from these numbers). Dining (2019: 5.0%, 2020: 14.0%). More celebrated
storm so much as the perfect mess. to £72bn in 2021 and a further +36.0% to storm so much as the Out is by far the largest Leisure category, Leisure categories such as Cinemas (2019:
Making projections and forecasts in £98bn in 2022. Despite this seemingly perfect mess. accounting for 69% of all Leisure spend in 1.7%, 2020: 1.7%) and Private Health &
Leisure spend decimated the current climate of uncertainty explosive growth, on a more sobering note, 2019 (split between restaurants 46% and Fitness Clubs (2019: 3.0%, 2020: 2.5%)
in 2020 are nigh on impossible. Mintel’s were it won’t be until 2024 that spend again pubs/bars 23%). This share reduced to 63% actually make up only a limited proportion
made as we entered Lockdown V3 and reaches its 2019 high water mark of £111bn. during 2020. Perhaps surprisingly, Land- of the overall market.
Of course, this has played havoc with the probably under-estimated the length that Thereafter, it is predicted to resume a more
economics of Leisure and destabilised what restrictions were actually to remain in force natural CAGR of +2.5% to +3.0%. With the one exception of Online Gaming
was otherwise a very strong growth story. (understandably). They correctly assumed and Betting, every Leisure sub-sector saw
Breakdown of Leisure Spend by Sub-Sector 2019
According to Mintel, in the five years prior that the vaccine would be rolled out to the In summary, realistically it will take 3-4 years a significant slump in consumer demand
(2015 – 2019) Leisure spend was achieving majority of those at risk by Q1 2021, but for Leisure spend to return to pre-pandemic in 2020. Unsurprisingly, those that rely on
an annual compound growth rate (CAGR) maybe under-estimated the pace of roll-out levels in absolute terms. But the bounce back 0.3% 10.0% mass gatherings were at the sharpest end
of +3.8% and in 2019, the market was worth to the wider population. Either way, their will be far swifter than most economists are of this. Nightclubs were down -92%, with
0.9%
as much as £110.6bn. Before the onset of predicting, as we will go on to discuss. 4.4% many unable to open between March 2020
COVID-19, Mintel were forecasting ongoing 1.7% and mid-2021. Already a market under
CAGR of +2.4% over the next five years and Spend by sub-sector ■ Eating out
pressure, the Night Time Industries has
Leisure spend was destined to surpass the 13.3% warned that 60% of the UK’s nightclubs
■ Gambling
£125bn threshold by 2024. Realistically it will take 3-4 One of the defining factors of the Leisure could face closure without further
years for Leisure spend to market is that it comprises a highly diverse
■ Gyms
government intervention. Similarly, the
Spend (historic and forecast) return to pre-pandemic range of sub-sectors. These are subject to
■ Cinemas
lack of events and absence of crowds
by sub-sector levels in absolute terms. their own particular drivers and dynamics ■ Nightclubs
69.4% prompted huge slumps in demand for
But the bounce back will and do not necessarily move in unison. ■ Tenpin bowling Music Concerts and Festivals (-90%) and
The pandemic has truly reset this be far swifter than most But such is the all-encompassing nature of ■ Other* Spectator Sports (-80%).
growth trajectory. Given all the extended economists are predicting, COVID-19 that all Leisure sub-sectors have
lockdowns and wider disruption, Leisure seen spend levels disrupted to a greater or Source: Mintel, Knight Frank At the opposite end of the performance
* ’Other’ includes Sports Participation, Performing Arts, Music Concerts & Festivals, Spectator Sports and Visitor Attractions
spending slumped by -53.6% in 2020 and lesser degree over the last 18 months. spectrum, Online Gaming and Betting
saw an increase in demand in 2020 of
+4.6%. One of the few Leisure sectors to
have a tangible multi-channel presence,
Breakdown of Leisure Spend by Sub-Sector 2019* Breakdown of Leisure Spend by Sub-Sector 2020 it was inevitable that the pandemic
would prompt a flight to Online Gaming
7.1% 0.2% as physical outlets were closed. There
7.3%
6.2% 0.2% 3.8% is an interesting parallel with the Retail
market here. Online Retail sales surged
0.9%
during times of lockdown, but failed
69.4%
3.8% to offset lost sales through store-based
■ Eating out locations and there was a net market
3.0%
2.4% E AT ING O UT ■ Gambling decline (Non-Food retail sales declined
1.7% by -12.4% overall in 2020, despite a +30.6%
1.4% 1.4% ■ Gyms
1.2% 1.2%
0.9% 24.5% spike in Online sales). A similar story in
■ Cinemas
0.3%
Gaming, with Online growth (+4.6%) not
■ Nightclubs 63.1%
counterbalancing a -31.5% decline in
Land-based
gambling
Onling gaming
/betting
Sports
participation
Private health
& fitness clubs
Music concerts
& festivals
Cinemas
Public leisure
centres
Spectator sports
Visitor attractions
Performing arts (c)
Nightclubs
Tenpin bowling
■ Tenpin bowling
Land-Based Gaming.
■ Other*
Similar dynamics in the Hospitality
Source: Mintel, Knight Frank Source: Mintel, Knight Frank
*Data relates to 2019 as this is more indicative of a “normalised”/non-COVID market * ’Other’ includes Sports Participation, Performing Arts, Music Concerts & Festivals, Spectator Sports and Visitor Attractions market, although arguably also more
question marks as to permanence of trends
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2020 e.g. in the five year period 2015-2019, Residual consumer confidence is
Growth by Leisure Sub-Sector 2020 Dining Out grew by +18%, Private Health & extremely low, not helped by spiralling
Fitness Clubs by +20%, 10 Pin Bowling by unemployment as the furlough scheme
20
+20%, Cinemas by +8% gradually unwinds. High inflation
5 will outstrip average wage growth and
0
A growth market coming into COVID-19 the consumer will rein in spending
is likely to emerge a growth market accordingly, prioritising “essential”
-20
as COVID-19 subsides – whatever the purchases such as food and health &
-32
devastating effects of the past 18 months, beauty over supposedly discretionary
Growth (%)
-40
-39 A growth market coming most Leisure categories thankfully tick categories, of which Leisure tops the list.
into COVID-19 is likely to this box. In essence, no money to spend, even less
-60
-58 -59
-62 emerge a growth market willingness to spend it.
-80
-70
-75
as COVID-19 subsides – 2021: start of the recovery
-76
-79 -80
whatever the devastating Wrong on virtually every count. Even the
-90
-100
-92 effects of the past 18 Few, if any, economists were predicting a high levels of unemployment predicted
significant consumer bounce back in 2021. have not materialised and consumer
Online Land-based Sports Dining Public leisure Private Visitor Tenpin Cinemas Performing Spectator Music Nightclubs months, most Leisure
gaming gambling participation out centres & health & attractions bowling arts sports concerts They are already being proved wrong, spending has in fact surged since lockdown
& betting swimming fitness clubs & festivals categories thankfully tick
pools with mounting evidence of huge pent-up has been lifted. Retail sales (which are
this box.
demand translating into both retail sales much more transparent and readily
Source: Mintel, Knight Frank
and leisure spend. Proof that economists available than Leisure spend) surged by
have very little understanding of the +20.9% in Q2 2021 and this growth was
consumer psyche and that Leisure spend spearheaded by more discretionary non-
witnessed during the pandemic. Dining the delivery side of the business that
is not nearly as discretionary as it maybe food goods (+65.0%). Freed from the
Out spend slumped by -57.8% in 2020 to blossomed during the pandemic. As
once was. shackles of lockdown, the UK consumer’s
just £32.4bn, less than half the value of the many retailers will attest, the transition to
response has been to go out and spend,
market in 2015 (£64.9bn). For the first time becoming a multi-channel operator can be
The economist argument? Even with rather than retreat into his/her shell. As it
ever, restaurant dining was overtaken by a highly rewarding one, but the process is
lockdowns slowly lifting, the consumer proved in previous recessions and times
Takeaways in 2020, helped by the rise of anything but straightforward.
remains in a highly constrained place. of economic / social hardship, spending is
3rd party apps making ordering multiple
cuisines more accessible and convenient. It has become something of a cliché to
A number of pub and restaurant operators say that COVID-19 only accelerated pre-
The challenge for many that had previously opted against existing market trends generally. Within Historic 5 Year Growth by Sub-Sector 2015 - 19 (%)
will be building on the takeaway or saw it as only a small part of Leisure, there are some partial truths, Lowest Lowest
delivery side of the business their business significantly ramped up notably the directions of travel of the two 40
that blossomed during takeaway infrastructure over the course extremes, Nightclubs and Online Gaming. 34.3
the pandemic. As many of the pandemic. Online Gaming was a high growth market 30 28.9
retailers will attest, the even before COVID-19 struck, increasing
21.9
19.9
transition to becoming a Offering an online / takeaway service in size by +34% between 2015 and 2019. In 20 19.6
18.3
15.7
proved something of a lifeline for many contrast, Nightclubs were already in long- 14.9
multi-channel operator can
5 Year Growth (%)
12.2
hospitality operators during periods of term decline and had contracted by -12% 10 10.6
be a highly rewarding one, 7.8
lockdown, enabling them to generate over the same period.
but the process is anything
at least some cashflow. But huge online 0 0.4
but straightforward.
growth statistics can be deceptive, By extension, we need to look beyond
particularly if leveraged off a very low, last year for longer term and sustainable -10
-8.7
indeed negligible, base. And they are growth trajectories. 2020 was a freak
-12.1
highly unlikely to compensate for lost year and while it may take individual -20
sales from physical sites. Now that the sub-sectors varying timeframes to stage Online Music Performing Tenpin Private Eating ALL Visitor Spectator Sports Cinemas Public Land-based Nightclubs
gaming concerts arts bowling health & out LEISURE attractions sports participation leisure gambling
dust is starting to settle and the Hospitality a recovery (largely based upon ongoing & betting & festivals fitness clubs centres
industry takes its first tentative steps restrictions), most will stabilise in due
towards post-lockdown recovery, the course. Most of the key Leisure sub-sectors Source: Mintel, Knight Frank
challenge for many will be building on had a solid track record of growth prior to
12 13
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actually the best antidote to wider malaise. its feet and not yet operating to anything Timeseries comparisons are obviously
like full capacity. But early signs are still key to understanding the rate of recovery.
Leisure generally has had a rockier road encouraging. Since reopening, consumer As a general observation, across all
Above all else, consumers’ spending propensities and
back to recovery than Retail, having been participation in leisure activities is at the categories, participation is markedly
subject to lockdown for longer. Many Leisure highest level measured since the start of higher now than it was in both January
priorities have been redefined, not just during the
activities also require social interaction, the pandemic, providing good reason for 2021 and October 2020, when lockdown pandemic but in the years prior. Leisure spend had
which many consumers may still be optimism – consumers who feel ready to restrictions were briefly lifted. But for benefitted from this reprioritisation process and is far
reluctant to embrace. Even in H1 2021, the take part in leisure activities plan to ramp all intents and purposes, still below less discretionary than it once was. In simple terms,
Leisure market is still very much finding up their activity now more restrictions pre-pandemic levels (July 2019). For
enjoying ourselves is a right and not a privilege.
have been relaxed. example, the comparable figures for
pub meals in July 2019 was 59% (vs 47%
Recent market research paints a realistic now), pub drinks 54% (vs 42% now) and
picture as to what stage the various table-service restaurants 57% (vs 44%
Freed from the shackles
sub-sectors are in their respective now). The overarching conclusion from
of lockdown, the UK
recoveries. Pubs and restaurants have this is that the recovery has been swift, but
consumer’s response has
thus far bounced back far more quickly realistically there is still some way to go.
been to go out and spend,
than their ‘big box’ and ‘mass-gathering’
rather than retreat into counterparts. Some 47% of survey Above all else, consumers’ spending
his/her shell. As it proved respondents had been to the pub for a propensities and priorities have been
in previous recessions and meal in July, while 42% had been to the redefined, not just during the pandemic
times of economic / social pub for drinks only. Some 44% had eaten but in the years prior. Leisure spend
hardship, spending is in restaurant with table service and 40% had benefitted from this reprioritisation
actually the best antidote to in a fast-food restaurant. Participation in process and is far less discretionary than
wider malaise. competitive socialising (21%) and cinema- it once was. In simple terms, enjoying
going (24%) is still somewhat lower. ourselves is a right and not a privilege.
Participation in Leisure Activities - July 2021
Visited pub (for meal) 47
Dined at Restaurant 44
Visited pub (for drinks) 42
Dined at Fast Food Outlet 40
Visited Gym 26
Attended Cinema 24
Participated in Competitive Socialising 21
Attended Live Sporting Match 18
Visited Music Concert / Festival 17
0 10 20 30 40 50
% of respondents
Source: Mintel, Knight Frank
14 15
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OBSTACLES &
OPPORTUNITIES
6 OPPORTUNITIES 6 OBSTACLES
A RESTLESS AVA I L A B I L I T Y A RECEPTIVE CONSUMER RENT STA F F
CONSUMER OF SPACE LANDLORD RETICENCE ARREARS AVA I L A B I L I T Y
Willing to spend money on Variety of floorplates With increasing appreciation for Confidence among certain Operators & landlords must find High vacancy rates and acute
leisurely pursuits becoming available through leisure in a quality tenant mix demographics / ages may take solution to the £6.4bn+ backlog shortages exacerbated by Brexit
rising vacancy rates time to rebuild before March 2022 & ‘Pingdemic’
MARKET NEED A M U LT I WELCOME TO STA F F S U P P LY C H A I N M U LT I - C H A N N E L
F O R V I TA L I T Y C H A N N E L V OYA G E THE WORLD OF COSTS SHORTFALLS TEETHING
B I G DATA
Leisure ideal formats to revive the Pursuit of online / takeaway +2.2% growth in NMW increases More red-tape at UK borders Integration complexities/
buzz of town centres channels provides an additional Increased access to customer data operators’ ‘wall of costs’ coupled with HGV driver costs of online operations and
revenue source via check-in / ordering apps shortages entrustment of brand to third
parties e.g. Deliveroo
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OBSTACLES VS lockdown, there is huge pent up demand
that is already being released. And figures
3 A Receptive Landlord
OPPORTUNITIES
in Mintel’s “Leisure Outlook – Summer The profile of Leisure as a tenant and space
2021” Report suggest there is much more occupier has evolved hugely over the years.
to come. 36% of those who went to a pub Originally, it was considered by many
for drinks in the month to July 2021 plan to landlords merely as a space-filler, almost
For all its multitude of challenges, COVID-19 will ultimately also provide go more frequently in the next month. 27% an afterthought to the mainstream Retail
opportunity for the Leisure industry, with lessons learned and strategic said they are more likely to go for a pub offer. And definitely a low-rent alternative.
initiatives borne of necessity morphing into long-term growth avenues. But it has meal, 31% more likely to eat at a restaurant This perception has changed considerably
also thrown up considerable obstacles that must be navigated along the way. with table service. Similar enthusiasm in over the years and most landlords at
the Non-Hospitality Leisure sub-sectors. least acknowledge Leisure’s qualities as
33% of cinema- / theatregoers in July a significant footfall-driver. The more
Retailer casualties have
expect to go to the cinema / theatre more progressive landlords are recognising the included a number of
going forward. A similar picture in gyms value of blending Retail and Leisure use anchor store tenants (e.g.
(35%) and live sporting events (34%). On so that the two complement each other Debenhams) and MSUs
the consumer side, the appetite for Leisure to best mutual effect. COVID-19 has also (Medium Sized Units) (e.g.
WORDS: STEPHEN SPRINGHAM –
is most certainly there. played a significant part in redressing Arcadia), meaning that
H E A D O F R E TA I L & L E I S U R E R E S E A R C H
landlord – tenant dynamics, such that there is unprecedented
it is very much an occupier’s market. vacancy of large footprint
2 Availability of Space The net result is that most landlords are
Leisure is an umbrella term for a diverse OPPORTUNITIES – units ideally suited for
much more predisposed to negotiating
range of sub-sectors, each with their own “Rule of 6” Leisure use. There is a real
Occupier fall-out has been considerable with Leisure occupiers than they were
dynamics, idiosyncrasies and directions Narrative on Retail opportunity now for the
during the pandemic across all Retail previously – and perhaps more open-
of travel. These are addressed in our Repurposing is rife, 1 A Restless Consumer Leisure sector to reabsorb
destinations, be they high street, shopping minded in terms of rent expectations than
series of Sector Snapshots. But there are expect Leisure to be a surplus retail space.
centres or retail parks. Figures from the was the case on the past. Leisure operators
also a series of more generic issues that major protagonist and As we discuss in the previous section of
Local Data Company (LDC) show that probably have a better bargaining position
transcend the Leisure market and will beneficiary. this report, the UK consumer is effectively
vacancy rates reached a new high of 15.8% now than they have ever had.
affect all the various sub-sectors to a chomping at the bit. Having been kept
in mid-2021. Usually cited as a barometer
greater or lesser degree. on a leash for three extended periods of
of distress and a sad indictment of the high
street, vacant units actually represent a
High Street Vacancy Rates 2008 - 2021
major opportunity for other occupiers to
acquire new space.
Consumer intention to increase participation in leisure activities in the future* 17
Retailer casualties have included a
Visit pub for drinks 36 15
number of anchor store tenants (e.g.
Attend the Gym 35 Debenhams) and MSUs (Medium Sized
Units) (e.g. Arcadia), meaning that there is 13
Go to live sport event 34 unprecedented vacancy of large footprint
Vacancy Rate (%)
units ideally suited for Leisure use. There
Participate in Competitive Socialising 11
34
is a real opportunity now for the Leisure
Visit Cinema sector to reabsorb surplus retail space.
33 9
Incidentally, this would not for the first
Dine at Restaurant time this has happened – retailer fall-
31
out in the 1990s / early 2000s prompted 7
Visit Pub for meal
27 a wave of branded Hospitality expansion
into secondary areas of many town centres 5
0 5 10 15 20 25 30 35 40
and the concept of ‘the Leisure circuit’ was 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
% of respondents
Source: Mintel, July 2021 born. Narrative on Retail Repurposing
* Consumers were asked whether they expected to do the leisure activities more, the same amount or less going forward (the figures show those that responded “more”). is rife, expect Leisure to be a major Source: Local Data Company
protagonist and beneficiary.
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Hospitality is the most obvious one it is without Clubcard). Many Leisure
4 A Market Need for Vitality
and many F&B operators have crossed operators now have real-time access to Job vacancies in Hospitality vs. All vacancies Index (100 = Pre Pandemic)
the divide to online / takeaway over the customer data that they can deploy to
‘Experiential’. The most over-used
course of the pandemic. A much needed huge strategic effect – everything from All Sectors Hospitality
buzzword currently doing the rounds. But
source of cashflow when physical outlets tailoring the offer/menu in local Leisure
at the same time, the process of reviewing 140
were closed, online can become both a sites, digital marketing, social media
our town centres and assessing their 130
major source of revenue and a seamless strategies, advertising, new site location
failings ultimately leads back to a simple 120
adjunct to the brand generally. Forecasts planning etc etc. Knowing how to mine 110
notion – they need to be more relevant,
suggest that the shift to takeaways / home this new-found Big Data is a separate 100
more exciting, more vibrant, able to 90
delivery will endure even after COVID-19 challenge (and may involve cost and 3rd
evolve and above all, provide a compelling 80
Index
subsides. In the month to July 2021, party outsourcing), but the basic building
reason to visit. All these aspects are the 70
A much needed source nearly three in five (59%) of UK adults blocks are there. Leisure is, by definition, 60
hallmarks of a Leisure market that thrives
ordered food for takeaway or home a consumer-centric business. The more 50
of cashflow when on freshness, creativity and new concepts.
delivery and more than a third (35%) did Leisure operators know about their 40
physical outlets were Not just landlords trying to backfill 30
so more than once. This put participation customers, the more they can prosper.
closed, online can problematic vacant Retail floorspace, 20
on a par with the periods before and
become both a major expect Leisure to rise up the agenda across 10
during nationwide lockdown. How best 0
source of revenue and a all areas of asset management, repurposing
to embrace multi-channel will depend O B S TAC L E S – Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun
seamless adjunct to the and town planning. And all stakeholders, 2020 2020 2020 2020 2021 2021
on the Hospitality operator and on the “Rule of 6”
be they shopping centre owners, landlords,
brand generally. location. Operators can either choose to Source: ONS, Knight Frank
developers, re-purposers, BIDs or Local
leverage their existing capacity and use 1 Consumer Reticence
Authorities, to take Leisure far more
their existing physical sites (effectively
seriously in any improvement projects.
driving more volume from a fixed cost We are bullish generally on the prospects these concerns going forward and adapt
base) or deploy so-called ‘dark kitchens’ of a consumer recovery, although this is accordingly – for example, fewer covers,
to service demand. There are no right something of a generalisation. For many table service and more conspicuous
5 A Multi-Channel Voyage
or wrong answers and establishing an consumers, it may take considerable attention to health and hygiene.
appropriate strategy is all part of the time to re-develop sufficient confidence
Some Leisure sub-sectors lend themselves
multi-channel adventure. to partake in Leisure-based activities – 2 Rent Arrears
far more to multi-channel than others.
for others, it may never happen. Some
figures from Mintel’s COVID-19 Tracker The issue of rent arrears is the proverbial
6 Welcome to the World Market Survey serve as a sobering elephant in the room, albeit one that is
Current impact on spending habits vs. pre pandemic (as of July 2021) Big Data
of reminder of this. Even post-lockdown generally considered purely in a Retail
More About the same / no change Less
(week 23-29 July 2021), some 44% of context. Leisure is, in fact, even more
Most Leisure operators have embraced survey respondents answered either embroiled, with very few operators
digital capability far more as a by- “Extremely Worried” (16%) or “Very meeting their quarterly rent obligations Leisure operators will
product of the pandemic, perhaps Worried” (28%) to the question “to what from March 2020 when the pandemic need to be sensitive to
redressing historic weaknesses in extent are you worried about being struck. Unpaid rent reportedly amounts to these concerns going
Dining Out 8 40 52
this area. The need to pre-book rather exposed to the coronavirus.” Some 31% some £6.4bn and a considerable portion forward and adapt
than merely walk-up has increased of respondents are still trying to limit the of this will be from Leisure operators. accordingly – for
the interaction between customer and time they spend in-store. The moratorium on forfeiture has thus example, fewer covers,
operator, more than often digitally. far prevented landlords from proactively
table service and more
Many operators have taken the very In terms of changes to spending habits taking action to recover monies owed, but
conspicuous attention to
positive step of developing their own compared to before the COVID -19 this is scheduled to be lifted in March 2022.
Leisure / entertainment
health and hygiene.
9 44 46 interactive apps. As well as the obvious outbreak, 46% of respondents said they From then, landlords will have the power
gains of more versatile booking and were spending less on Leisure, and only to evict non-paying tenants and pursue
ordering processes, the real end game is 9% more. Not surprisingly, there are payments through the courts. Not all will
actually very different – ready access to significant age skews, with far greater take this action, but neither will all simply
0 10 20 30 40 50 60 70 80 90 100
customer data. As many retailers would levels of concern higher up the age write off any outstanding arrears. Leisure
Source: Mintel, Knight Frank attest, customer data is gold dust (Tesco spectrum. The implications? Leisure operators need to work with landlords
would never have become the force operators will need to be sensitive to towards compromise solutions (e.g.
20 21R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S
staggered re-payments, lease re-gears) to and Brexit usually cited as exacerbating wages slipped in under the radar. From Force Survey for the second quarter
avert a potential occupier blood bath. And the problem. For staff that have returned April 2021, the National Minimum Wage suggests that 14,000 EU lorry drivers
put negotiations and contingency plans in to their roles, the so-called "pingdemic" increased by 2.2% from £8.72 to £8.91. left jobs in the UK in the year to June
motion now, rather than wait until March. has led to further shortages due to workers The age threshold was also reduced from 2020, but only 600 had returned by July
being told to isolate by the NHS app. But 25 to 23. The London Living Wage is 2021. It may take the likes of McDonald's
the ONS data suggests a more long-term higher still at £10.85. Cumulatively, the running out of milkshakes at certain sites
3 Staff Availability – and worrying – trend. Job vacancies in National Minimum Wage has increased by or Nando’s having to temporarily close
the industry were already consistently £2.72 (+44%) over the last decade. While ca. 50 sites on account of running out
The staff shortages in the Hospitality at high levels before the UK went into no one should begrudge hard-working of chicken for the extent of these supply
sector may be well-documented, but the its first lockdown in March 2020 - since Leisure staff a decent wage, this remains chain pressures to hit home.
sheer number of job adverts in restaurant 2017, vacancies in the industry have been a major cost headache for many operators
windows on a cursory walk down any consistently at a staggering 90,000 or – to put this into perspective, how many
While the majority of
high street really brings the issue home. more. Blame COVID-19 or Brexit, the issue Leisure operators have grown their top 6 Multi-Channel Teething
the narrative during
According to the ONS, job vacancies is more deep-seated – whisper it, but the line +44% over the same timeframe?
are at their highest levels since records Hospitality employment market has an
the pandemic was on Very few and the dynamic of costs ‘Necessity is the mother of invention’.
began. There were 102,000 vacancies in image problem which urgently needs to the furlough scheme, outstripping sales is a very real one for Most Leisure operators, one way or
the sector from April to June 2021 - a rise be addressed. another significant many Leisure operators. another, were forced to embrace the
of +12.1% compared with the 91,000 figure increase in minimum digital world during the pandemic,
for the same period in 2019. Separate wages slipped in under whether that was to install online
analysis by UK Hospitality found 80% of 4 Staff Costs the radar. 5 Supply Chain Shortfalls booking capabilities, apps, or particularly
businesses reported vacancies for front- in the case of the Hospitality sector,
Multi-channel brings
of-house roles, 85% for chef roles, 47% Staffing represents a potential double- Two key intertwined issues stand to exert embrace online delivery for the first
much more complexity
for housekeeping and 43% for assistant or whammy for Leisure operators. On the one pressure on Leisure supply chains in the time. In an effort to maintain some level
into the business model.
general managers, while estimating the hand, there is a shortage, on the other hand short- to medium-term: Brexit and a lack of cashflow, many Hospitality players
Complexity also usually
overall staff shortfall to be in the order of staff costs are increasing considerably. of HGV lorry drivers. Many of the horror- became multi-channel operators during
200,000. Industry bodies suggest one in While the majority of the narrative during story Brexit predictions of supply chain the pandemic by default. Few are likely
equates to cost and
five workers have left the sector during the pandemic was on the furlough scheme, meltdown have not materialised, but a to simply turn off the online tap now, requires considerable
the coronavirus pandemic, with COVID another significant increase in minimum number of Retail and Leisure operators despite physical sites reopening. The management.
have already flagged increased paperwork transition to multi-channel is potentially
and red tape, others the need completely a very lucrative one, but also one fraught
re-engineer EU-UK and GB-NI supply with pitfalls, as many retailers have
Increases in National Minimum Wages since 2012
chains. Either way, there is a heightened found to their chagrin.
risk of supply shortages and higher costs,
which the Leisure operators must either As well as the obvious challenges of
absorb themselves, or try to pass onto the ensuring efficiency across the delivery
consumer. In addition to staffing their network (and successfully working with
actual sites, a tight labour market is also relevant 3rd parties), there are whole host
impacting on many Leisure operators’ of other considerations – consistency of
supply chains. quality, product, pricing and branding
and seamless integration of all channels,
A survey by the Road Haulage Association physical and online. The flipside of
(RHA) estimated there was a shortage of opening up to a wider audience is that
more than 100,000 drivers in the UK, out it heightens to risk of brand devaluation
£6.19 £7.20 £7.50 £7.83 £8.21 £8.72 £8.91 of a pre-pandemic total of about 600,000. e.g. if a Deliveroo driver messes up, in
The RHA has said some 30,000 HGV the eyes of the consumer, it will still
2012 2016 2017 2018 2019 2020 2021 driving tests did not take place last year reflect badly on you as a brand. Multi-
+101p / +16.3% +30p / +4.2% +33p / +4.4% +38p / +4.9% +51p / +6.2% +19p / +2.2%
because of the pandemic, adding that a channel brings much more complexity
"historic" shortage in drivers had been into the business model. Complexity
Source: UK Gov, Knight Frank exacerbated by changes to rules following also usually equates to cost and requires
Brexit. Analysis of the latest ONS Labour considerable management.
22 23R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S
SUB-SECTOR SUMMARIES SUB-SECTOR SUMMARIES
PUBS RESTAURANTS
MARKET VALUE & FORECASTS MARKET VALUE & FORECASTS
£25.1bn +9.3% -2.1/-10.6 10,387 6,350 £76.7bn +18.3% +3.6% 5,971 63%
MARKET VALUE HISTORIC GROWTH JUNE PUB / BAR TENANTED PUB MANAGED FOODSERVICE HISTORIC GROWTH FORECAST GROWTH UK RESTAURANT SHARE OF LEISURE
(2019) (2015-2019) OUTLET % SALES VS OPERATORS OPERATORS MARKET VALUE (2019) (2015- 2019) (2019-2025) OPERATORS (MULTIPLES) MARKET
2019 LEVELS
Market size (2015-2025f) Largest operators, by portfolio size (2021)
Y-on-Y change Actual 450
+7.2% £851.8bn £324.7bn +235% 90,000
FORECAST
60
428
47.1
80,000 42.4
40
GROWTH IN MANAGED PUB INVESTMENT 5 YEAR INVESTMENT VOLUME INVESTMENT VOLUME 70,000
OPERATORS (2014 – 2018) VOLUMES (2019) AVERAGE (2015-2020) GROWTH (2015-2019) 20
Annual change (%)
60,000 11.5 258
Market value (£M)
4.4 4.8 5.3 2.7 238
2.5 2.4
50,000 0 206
181
Sites trading, by segment (as of July 2021) Leading operators, by outlet number (2018) 173 158
40,000 -20
Tenanted
99.5 99.5 30,000
100
Fullers 179 -40
Marstons 479
20,000
98 96.7 96.7 97.0
-57.8
-60
Greene King 1,140 10,000
96
Star Pubs & Bars 2,900
0 -80
Punch Taverns
2015
2016
2017
2018
2019
2020E
2021F
2022F
2023F
2024F
2025F
1,229 Pizza Nando’s PIzza Frankie & Prezzo Thyme Beefeater Zizzi
94
Express Hut Benny’s Grill
%
Enterprise Inns/El Group 4,400
92 90.1
88 Managed TOP 10 UK EATING
DESTINATIONS, BY
86
Fullers
Stonegate Pub Company
209
772
£38m 12% 44% +42% RESTAURANT PROVISION
INVESTMENT
84 Marston’s 1,066 PLEDGED TO 700
STAR PUBS & BARS 1. LEEDS
Bar Bar Casual dining Community Food Pub High Street JD Wetherspoon 883 BY HEINEKEN
restaurant restaurant pub Pub
CONSUMERS DINE OUT AT LEAST VISITED RESTAURANT SINCE RECOVERY IN DINING 2. BIRMINGHAM
Greene King 1,733
ONCE A WEEK RESTRICTIONS EASED RESERVATIONS (AUGUST 2019 VS
3. READING
Mitchells & Butlers 1,687 AUGUST 2021)
KEY INVESTMENT DEALS (2019-2020)
4. NOTTINGHAM
0 1,000 2,000 3,000 4,000 5,000
LO CATION PRICE £M PURCHASER O C CUPIER
5. BATH
London The Bucks Head -
KEY PORTFOLIO DEALS (2019-2020)
+150 +150 +145
4.1 Sterling Life
Camden High Street Stonegate Pub Co RPI 6. CARDIFF
Godalming The Refectory - DETAILS PURCHASER
3.4 Private client 7. OXFORD
Old Portsmouth Road Punch Taverns
Stonegate portfolio – 42 sites RedCat Pub Company 8. MANCHESTER
Coventry The Flying Standard -
3.1 Private investor
Trinity Street JD Wetherspoon Punch Pubs & Co – 7 pubs Punch Pubs & Co Ltd
9. EDINBURGH
London The Three Wishes - TARGET EXPANSION OF MCDONALD’S HIGH TARGET EXPANSION FRANCO
1.0 Undisclosed East Midland portfolio – 14 sites Hawthorn Leisure
749 Green Lanes JD Wetherspoon COPPA CLUB / TAVOLINO STREET PIPELINE TO 2024 MANCA / THE REAL GREEK 10. SOUTHAMPTON
SOURCE: KNIGHT FRANK, MINTEL, LDC, ALIXPARTNERS / CGA, COFFER CGA SOURCE: KNIGHT FRANK, MINTEL, LDC, PMA, OPENTABLE, EGI
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SUB-SECTOR SUMMARIES
COFFEE SHOPS
The restaurant sector was not in the rudest of health
coming into the pandemic and was labouring under
MARKET VALUE & FORECASTS
its own structural issues. Many of these were self-
inflicted, over-expansion and unaffordable rents
being two of the most prevalent ones. COVID did not
cause these, it merely laid them bare.
£3.8bn +27.8% +0.6% 9,159 90% 85%
MARKET VALUE HISTORIC GROWTH FORECAST GROWTH BRANDED COFFEE PURCHASE VISIT AT LEAST
(2019) (2015-2019) (2019 – 2025) OUTLETS COFFEE IN PERSON ONCE A WEEK
Market size (2015-2025f)
Y-on-Y change Actual
FORECAST
4,500 20
4,000
Annual change (%)
9.8 7.7
8.9 7.9 10
Market value (£M)
4.4 4.7 7.8
3,500 3.5
5.4 4.9
-37.5
3,000 0
2,500
-10
2,000
1,500 -20
1,000
-30
500
0 -40
2015 2016 2017 2018 2019 2020E 2021F 2022F 2023F 2024F 2025F
68% +1.2% £27,650 46% 24 200
ANTICIPATE SPENDING FORECAST OUTLET AVERAGE MONTHLY OF OPERATORS REPORTED DRIVE THRU COFFEE PRET STORES TO OPEN
SAME / MORE ON COFFEE GROWTH IN 2022 FINANCIAL IMPACT OF FINANCIAL IMPACT OF OUTLETS IN LXI REIT IN NEXT THREE YEARS
POST LOCKDOWN LOCKDOWN PER STORE LOCKDOWN >£50K PORTFOLIO
Coffee shop outlets, by sub-sector Most used formats (inc multiple responses)
Branded Independent Non-specialists
30,000
25,000
20,000
15,000
IN-STORE
89%
10,000
5,000
HOME MOBILE
DRIVE-THRU DELIVERY KIOSK
0
19% 9% 8%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
SOURCE: KNIGHT FRANK, MINTEL, ALLEGRA WORLD COFFEE PORTAL, THE GROCER
26 27R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S R E TA I L N E W S L E T T E R – L E I S U R E : R E S P O N D I N G T O A N E X P E R I E N T I A L C R I S I S
F&B – Leon, Itsu, Gourmet Burger Kitchen have
all launched CVAs over the last couple of
These structural weaknesses have not
been washed away by COVID. Ironically,
P RO B L E M S O LV E R O R
years, as have many more besides. some of the CVA ‘culprits’ that closed
sites and rebased rents are already back
The common denominator of virtually all on an aggressive expansion trail. We can
PROBLEM CHILD? these operators? Private equity ownership.
Too common to be a coincidence, the
but hope that lessons have been learned.
Above all else, the fact remains that some
PE model (debt-backed acquisition, restaurant operators are better capitalised
F&B remains the standard-bearer for the Leisure industry as a aggressive expansion, ongoing cash than others.
whole. It is a responsibility that has been tested to the core during extraction) has done the restaurant sector The sad fact is that
COVID and its component parts are at very different stages of few favours. The demise of a seemingly COVID impact on pubs however busy a
recovery post-pandemic. popular high street F&B brand normally restaurant is on the
prompts erroneous conclusions in the Pubs fared little better, with many ground, this provides
media of the end of casual dining (when facing the exact same challenges as their
limited defence against
it is, in fact, still a growth market) and restaurant counterparts. The British Beer
a flaky, debt-ridden
head-scratching amongst consumers, & Pub Association revealed that that in
balance sheet.
who cannot fathom that a restaurant that 2020, 2,000 pubs are estimated to have
is always packed out with customers is on been lost forever. Some 2.1 billion pints
its knees or facing closure. The sad fact is in beer sales were lost due to a full year
that however busy a restaurant is on the of either forced closure, or trading under
ground, this provides limited defence severe restrictions and £8.2 billion in trade
against a flaky, debt-ridden balance sheet. value was wiped out from the sector in beer
WORDS: STEPHEN SPRINGHAM – Monthly Trends in Restaurant Bookings 2020 - 2021 YTD
H E A D O F R E TA I L & L E I S U R E R E S E A R C H
0.6
42%
F&B is by far the largest sub-sector within were one thing, the operational upheaval isolation, but in combination? Only for the 0.4
Leisure, accounting for around two thirds another thing altogether. Recalling of rug to be unceremoniously pulled again 28%
22% 20%
of all Leisure spend. But its importance staff from furlough (many of whom may through an abrupt return to lockdown. Not 0.2
Transactions
goes far beyond a quantifiable percentage have secured employment elsewhere), re- once, but twice. You couldn’t make it up. 6%
– virtually all Leisure pursuits incorporate establishing supply chain of fresh and non- 0
-2%
-3%
at least some F&B element in their wider ambient food products, ensuring health & But parking COVID to one side, the -11%
offering and more often than not, F&B safety compliance all huge headaches in restaurant sector was not in the rudest of -0.2
is where the actual money is made – the health coming into the pandemic and was
-0.4
‘main event’ or concept itself is actually labouring under its own structural issues.
-47%
little more than a magnet to pull punters Many of these were self-inflicted, over- -52%
-0.6 -55%
in, the real financial gain coming from expansion and unaffordable rents being -100%
their ancillary spend. It is impossible to two of the most prevalent ones. COVID did -74%
Virtually all Leisure -0.8
over-state the importance of F&B in the not cause these, it merely laid them bare.
pursuits incorporate at
wider context of the Leisure market. -1
least some F&B element A litany of restaurant CVAs and failures
-100% -99% -99% -99% -100% -100%
COVID impact on restaurants in their wider offering are the most obvious manifestation of this -1.2
and more often than structural weakness. Pizza Express, Prezzo, Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug
2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2020 2021 2021 2021 2021 2021 2021 2021 2021
Tumultuous does scant justice to the not, F&B is where the Jamie’s Italian, Yo! Sushi, Carluccio’s, Caffe
trials and tribulations of the restaurant actual money is made. Nero, Azzuri Group, Byron Burgers, Le
sector over the last 18 months. Forced Pain Quotidienne, Casual Dining Group, Source: OpenTable, Knight Frank
lockdowns and the loss of substantial trade Chiquittos, Pizza Hut, Wahaca, Wasabi,
28 29You can also read
