The following opinion article appeared in the latest edition of Retail Week, and was written by Cushman & Wakefield’s Head of EMEA Retail, Justin Taylor.
I recently visited two of the most iconic retail and leisure destinations in the world – Las Vegas and Dubai.
In both cities, money talks, economies are fuelled by gambling and oil, and “biggest, tallest, brashest” is the mantra followed by most.
These markets are unique, driven by cultural differences, brutally hot weather and availability of land on an almost biblical scale.
As the environmental agenda increases for sustainable property, it will be interesting to see how these mall owners respond.
From a retail property perspective, the strategy is very clear – and aligned with Europe.
Malls need to further diversify their leisure entertainment and food and beverage propositions. Dubai Mall, for example, now has over 120 restaurants – an incredibly diverse offer.
These two strands are vital in order to keep attracting customers back and encouraging them to spend more. Shops feed off leisure, and vice versa.
Growing leisure propositions
In the US, Tripe Five – owners of Mall of America and West Edmonton Mall in Canada – are now developing the 4.8m sq ft American Dream NYC.
On completion, the scheme’s leisure concepts will include an amusement park, waterpark, indoor ski slope, big wheel, performing arts theatre, ice rink, cinemas, Sea Life aquarium, Legoland Discovery and a hotel.
They don’t talk about dwell time in minutes or even hours, but in days.
But all of this raises the age-old question: how do you make money out of leisure?
“In the US…they don’t talk about dwell time in minutes or even hours, but in days.”
The quick answer is, you probably don’t. The longer answer is that some shopping centre landlords are now opting to own or operate their leisure activities themselves, given the high levels of initial capital expenditure and running costs.
To do so, property owners need to become experts in the hands-on, operational side of a very consumer-facing business.
The capital cost can also be offset by offering the leisure operator high visibility advertising sites, for which there is a much stronger revenue stream. The additional part of the analysis is what extra spend the leisure generates for the retail component of the centre.
Owners will need to follow the lead set by retailers to make the customer experience in their malls more engaging and experiential.
Learning from the UK
What’s clear is that UK trends are being replicated worldwide, in what is ultimately a single global shopping and entertainment market.
Through technology, the customer has total transparency on product, price, service and choice.
There is much to learn from looking at and talking to companies across the world and from outside the traditional property circuit.
The competition to develop, innovate and attract evermore technologically advanced leisure offers will increase, embracing education, culture and learning as part of their appeal.
“UK trends are being replicated worldwide, in what is ultimately a single global shopping and entertainment market.”
This will challenge leisure operators, technology companies and learning organisations to co-develop new ventures with property owners, as well as corporates who will look to capitalise on the customer-facing opportunity that a shopping centre provides.
The rental model will need to adapt to reflect the role shops now provide as a gateway to the customer purchase path which, ultimately, may be via mobile or tablet.
The property funding model will need to be more flexible in how it appraises the wider value leisure plays in shopping centres.
If it does not, Europe will not follow the best mixed-use developments found in Las Vegas or Dubai.