The small number of outlet centres compared to traditional shopping centres or out-of-town retail parks has meant the sector has been traditionally rather quiet. But, as the retail landscape changes and there’s a shift in the air in terms of occupier mix, outlet centres are being heralded as a new way to enhance more traditional retail assets.

The relationship between landlord and tenant is mutually beneficial when it comes to outlet centres. There is a transparency in the turnover leases that many schemes favour where the rent payable by the tenant is calculated by the turnover achieved. When compared to longer, more traditional leases, this gives far more flexibility in terms of ensuring that there is an increased opportunity for asset management and a reduction of vacant units or a space that’s visibly in decline. 

Outlet centres may hold the key to the regeneration of shopping centres. At Princes Quay in Hull the offering is split between traditional retail brands and outlet stores. This multi-purpose approach has the potential to breathe new life into a centre; widening the tenant base and allowing new brands to test their metal with the more flexible lease structure. These changes will also attract a new wave of visitors to the centre, broadening its appeal.  

From an investment perspective, the appetite for outlet centres remains strong. The sector is growing, and the fundamentals mentioned above make for an attractive asset class with potential for considerable asset management. The changing nature of the retail market means that there is ample opportunity for outlet centres to adapt and complement existing retail assets, making them an interesting prospect for investors.

Further information

Read: Spotlight: The evolution of the outlet centre