Leisure is an attractive prospect

Director of Investment, Paul Clark, shares his confidence in the UK leisure sector.

26 April 2013

Heddon Street restaurants

Despite the challenges facing the UK economy, consumer spending on leisure has been consistently strong over the last fifteen years. Recent evidence suggests that this positive trend is becoming even more pronounced with consumer spend on leisure growing by 2 per cent per year between 2007-2012, compared to a 0.6 per cent annual fall in total consumption over the same period.

This seeming disconnect with wider economic trends can be attributed to the higher priority now placed on entertainment compared to previous generations;  with leisure activities, such as gym memberships and cinema tickets, remaining comparatively cheap. Similarly, social patterns, such as increased working and commuting hours, have increased the propensity to eat out and look outside of the home for leisure activities. This is why we see leisure as playing an increasingly important role across our portfolio.

However, recognising the sector's strength and realising the potential of specific investments are not one and the same. Informed investors recognise that the most crucial features for a successful leisure-led scheme are critical mass, location and a diverse tenant mix. The latter provides resilience, as ideally no single occupier should be accountable for a substantial proportion of the income. Restaurants (especially larger operators better able to drive efficiencies), cinemas and fitness facilities are all strong performers which can create a strong tenant mix to drive income returns.

As with any asset class, an active approach to asset management is crucial to achieving success. Investing in the addition of leisure space in and around existing retail schemes improves the visitor experience and extends dwell time, increasing average spend. Similarly, continuing to invest in leisure assets will help existing tenants maximise their performance, as well as attracting new occupiers, further diversifying the asset's offer.

For the foreseeable future, leisure represents an attractive prospect for investors with specialist skills in the sector and a willingness to invest to maximise the potential of an asset. Across our portfolio we continue to extend our leisure interests, investing in dominant, leisure-led schemes but also working to increase leisure provision within existing assets. In the West End, the restaurants and bars of Heddon and Swallow Streets support our retail and office offer on Regent Street. We are also increasing our leisure exposure within our regional holdings. In Newcastle we own The Gate, a 210,000 ft2 stand-alone leisure scheme in the city centre, and are committing to a leisure based extension of our MK1 Fashion Park in Milton Keynes.

This is a strategy that has served us well, helping us to significantly enhance long term sustainable returns from our portfolios both in central London and across the UK.