High-octane leisure activities energize real estate
From go-karting tracks to trampoline parks, leisure activities in the UK are getting bigger and bolder – and finding the right buildings to accommodate them is about more than plenty of floor space and high ceilings.
Industrial and warehousing units continue to be popular choices – but the next stop is increasingly retail properties, where space is more readily available.
Demand for warehouses – particularly from e-commerce operators – has driven rents up and lead to limited supply. While landlords are still willing to consider alternative uses for their industrial space, competition between the logistics and leisure sectors is extremely high for well-located properties, says Rob Howarth, director of leisure agency at JLL.
“In the south east of the UK in particular, investors are paying keener yields for industrial assets,” he says. “Last mile delivery facilities from e-commerce businesses have moved in and taken space which perhaps would have simply sat vacant earlier in the cycle or been occupied by leisure users.”
Getting the buzz
Adrenaline-fuelled activities have taken off across the UK in the last five years. Trampolining has risen in popularity since Bounce opened in Milton Keynes in 2014, hosting families sessions, exercise classes and work outings. Indoor climbing is growing by 15-20 percent a year in the UK, with more than a million visits to indoor walls in 2017, according to the Association of British Climbing Walls.
“Whether it’s go-karting, trampolining or sports, there’s demand from the leisure sector for space,” Howarth says. “A unit on the edge of town is an ideal catchment play, within proximity of large conurbations.”
In Germany, for example, the JUMP House trampolining chain, which now has seven sites up and running, is based largely in industrial parts of town.
Some of the demand from leisure operators could now find its way not only into warehousing but also empty UK retail units, says Howarth. Major UK shopping centers, such as Kent’s Bluewater, have added more leisure elements in recent years.
“It’s already happening, and we will see that more on out-of-town retail park locations and within shopping centers,” he says.
Conveniently, retail centers are, unlike warehousing districts, better set up for the arrival of large numbers of visitors all at the same time.
“Smaller industrial units in particular were of course not originally conceived for large numbers of cars,” Howarth says. “There’s also the safety element – do families want to be parking in streets used by large lorries? For this reason, not all warehousing zones have been a good fit.”
Concepts such as the UK’s Oxygen Freejumping that initially set up in warehousing units have now made the leap into more accessible locations. Oxygen recently took space at The O2 Greenwich complex, already an established leisure location with good public transport links – as well as enough parking spaces for large visitor numbers.
“There’s certainly a trajectory for the more successful leisure concepts – from their formative years in warehouse locations to moves such as Oxygen’s,” says Howarth. “Of course, they need to have built the brand recognition and a solid customer base to make these new sites a success.”
Changing tastes, changing uses
What is popular, however, can soon change. Leisure concepts tend to evolve quickly – what’s in vogue today may not be in a few years’ time, says Howarth.
“However, large spaces are easily adapted and, with relatively little effort, switched from say paintballing to go-karting – with the cost being borne by the tenant.”
For landlords – there is, of course, the issue of use classification in their portfolios.
“It may not be ideal for a warehouse investment fund launched with the purpose of investing in, say, long-term income generating industrial units, to then have a misfit of a leisure asset in the portfolio,” explains Howarth. “So not all investors are able to adapt to a change of use so comfortably.”
Regardless of landlord origin, the leisure sector, says Howarth, remains in fine health.
“Concepts are constantly emerging – and that means space requirements,” he says. “Wherever there’s vacancy, bringing in leisure concepts can offer a good solution for real estate owners.”