In the midst of the ongoing and ever-evolving Covid-19 situation leisure operators are facing unprecedented challenges. 

Family Entertainment Centres (FECs), for example, have been a burgeoning leisure sub-sector since 2018, taking sites of over 20,000 sq ft and offering multiple leisure activities under one roof. However, following the lockdown announcement, all have now ceased trading, presenting immediate cash flow problems and casting doubt over further expansion plans. 

Those operators with large UK portfolios have been forced to retreat, turning their focus to the internal business and emergency measures to combat the closures. But now that we're several weeks into the crisis, the initial shock of closure and the subsequent reactions have passed and businesses are considering their future and the need to cautiously continue to progress building their pipeline.  

While in most cases operators will not be able to legally commit to a new site until they see their businesses reopen and cash flow return to normal levels, this has not stopped many from continuing to engage with landlords, using this time to negotiate and finalise terms. This proactive approach in such challenging times will allow those operators to hit the ground running once the market returns to normality.

There is a recognition that deprioritising future opportunities in this time of crisis will result in operators falling behind, particularly as most in the FEC sector are currently in growth mode. Stalling all acquisitions means potentially sacrificing the best locations and threatening a return to business as usual once trading resumes. 

Conversely, the current situation also presents unencumbered opportunity for those in strong financial positions and those with little current exposure to the UK market.

Regionally, operators such as Inflatanation and Ninja Warrior, which have relatively small UK portfolios, will be able to benefit from the availability of space without the same commitments or ties as their FEC competitors with larger UK estates.

In London, the trend for Intellectual Property (IP) backed operations over the last 12 months has sparked a space race, with multiple concepts with similar property requirements searching for large boxes across the capital. For example, Toca, a competitive socialising football concept, has been looking for sites this year and its search continues despite current circumstances, with the hopes of having something agreed before activity in the sector returns and the competition intensifies. 

Ultimately, we anticipate that while Covid-19 presents an extraordinary challenge to all operators within the leisure sector, providing the market is able to return to normality within the next 12 months, those that remained optimistic and continued to consider new expansion opportunities will thrive.

There will undoubtedly be a surge on transactions which are conditional upon the lifting of Government restrictions, and those operators will benefit by being the first off the blocks with new openings as consumers crave e leisure experiences following an extended period of quarantine. 

Further information

Contact Savills Leisure