The whole retail sector has already been in transition before the pandemic. In the UK, e-commerce had reached 20% of total retail sales already since 2019. Retail failures and rising vacancies forced landlords and public authorities to rethink the future of retail parks, leading to more flexible planning that has allowed the repositioning of schemes. Planning regulations have been revised to allow new land uses in sites with underperforming parks. Some of them have been redeveloped to include residential units, addressing the pressing issue of housing shortages in some parts of the country.

In Europe, despite the fact that online retail penetration has been slower and the supply of retail parks per capita is below UK levels, an increasing amount of the stock is becoming dated. Several retail park owners and investors have identified opportunities for redevelopment and expansion of existing schemes and have enhanced the offer with new product categories, leisure, F&B and even clinics. Moreover, there is a growing focus on the development and repositioning of smaller schemes in secondary cities, with a focus on convenience and services. The schemes, that have focused on improving the design and optimising their tenant mix, have also been able to respond successfully to the changing needs and priorities of shoppers during the current health crisis.

In Spain, Pelayo Capital, the A Coruñabased investment fund is repurposing the former Dolce Vita Coruña shopping centre into a 50,500 sq m state-of-the-art retail park, named Breogán Park. The scheme, which is aimed to open during the first months of 2022, will include 30 retail warehouses, restaurants, gym or co-working, featuring a central grove with direct entrances to the retail units.

Prospects for hybrid operation

The share of online sales in Europe is due to increase from 18% in 2020 to almost 25% in 2025 (Forrester Analytics) challenging traditional retail formats. But challenges come with opportunities. Whilst less retail space will be required in the future, still the majority of retail sales will be taking place in physical stores. Yet, consumers are shopping through multiple channels and retailers need to offer omnichannel options to their customers.

Retail parks are well placed to combine traditional with online retail in one location. Retail parks are increasingly seen as a hybrid operation providing in-store retailing with last mile delivery fulfilment options. It could be argued that fulfilling online orders through the store, essentially translates to store sales; at the very least it relies on the relationship with the physical store, highlighting its true value and continued importance going forward.

The schemes that have lost their attractiveness as retail destinations, can be re-purposed to fulfilment centres, in response to the rising need for last-mile logistics, benefiting from good accessibility and proximity to dense urban areas. Last year for example, we saw Prologis buying Ravenside retail Park in North London in order to expand its distribution network.

BIG BOX STORES AS MICRO_FULFILMENT CENTRES

In more advanced markets in terms of online penetration, such as the US and the UK, big box stores operate as in-store micro-fulfilment centres for online delivery at the back of customer facing stores. This is common in the food and grocery sector, which requires quick and easy access to their customers, as it often involves sensitive, temperature control products. But it is not just supermarket operators that have begun to recognise the importance of their out-of-town store network in fulfilling online consumer demand. For Kingfisher in the UK, growing online sales is a key strategic priority, with investment in the channel allowing them to respond quickly and effectively to changing consumer behaviour during COVID-19. Online sales rose 158% during FY2020/21, driven by strong growth in click-and collect(+226%) which now accounts for 78% of group online sales, up 16ppts on last year. In other words, more than three quarters of their online sales require their network of stores for fulfilment, which of course has the added bonus of driving additional consumer sales to the store at the point it is collected.

Retail parks need to adapt to mobility shift

An additional consideration for the long run is the expected rise in the use of zero emission cars. Future customers who will be users of electric vehicles, will expect to be able to charge their cars, wherever they stop; therefore the installation of charge points becomes essential element of retail park infrastructure.

In the UK, retail estate developer Brookhouse Group in partnership with Engenie, has opened rapid electric vehicle (EV) charging points at its busiest retail parks.

In the Czech Republic, Lidl is installing EV quick charging points at their stores and allows their customers to use these free of charge. The retailer started to offer charging points for e-bikes and is focusing on expanding these as well. Aside from Lidl, the network of EV charging points is massively expanding with many retail parks and shopping centres already connected.

Given the higher cost of EVs, it is likely that overall car ownership will drop and should see a rise in the use of public transportation, walking and cycling. This shift, combined with the growth of working from home, will benefit local convenience stores, which have already experienced a revival during lockdown. In response to this trend, major supermarket brands, have re-evaluated their store portfolio and are opening smaller formats (up to 1,000-1,500 sq m). In Italy Esselunga has announced plans to expand the roll-out of its La Esse proximity store format. SPAR Netherlands has launched a new convenience concept, SPAR City small In the UK, Tesco and Amazon (Fresh) have opened smaller stores in central London, and are experimenting with till-free technologies, that aim to maximize convenience, through seamless checkout. Sainsbury’s has also joined forces with Amazon to pilot a cashier-less stores in London. Electrical retailer Media Markt and DIY Leroy Merlin are exploring the opening of smaller urban stores too. IKEA is opening small format stores in urban areas (Vienna, Piraeus, Madrid, Barcelona), where customers can buy accessories and smaller furniture, have a coffee or a meal at the restaurant and order larger items for nextday home delivery.

Retail parks will remain relevant, as long as they address the evolving consumer needs. Regional parks, which require the use of car, need to offer a purpose to consumers to visit them; free parking, easy access, value and convenience can be complemented with F&B and unique leisure experiences (climbing, karting, family entertainment) and become destinations where customers can spend the day. Mitiska extended Parc Val Saint-Clair near Caen in France with the inclusion of EKART (electric indoor karting). The retail park is adjacent to a Carrefour hypermarket, comprising 18 units occupied by tenants such as Electro Depot, Action, Sport 2000, KFC, Chaussea and Maxi Zoo. 

Climbat is a leading operator in the world of climbing gyms. It is active in France and plans to have 30 centres in Europe by 2023. The average area off Climbat centres is around 1,200 sq m and could be located in retail parks.

On the other hand smaller retail parks in easily accessible locations by bike, walking and public transport, will focus on convenience, services and a mix of uses that can generate frequent visits. For example Parc de l’Europe, developed by Mitiska in Wavre, Belgium, combines retail with SME units (for production, storage and distribution), as well as co-working space, and is within walking distance from the local train station.