Basingstoke Designer Outlet – Initial Review

Basingstoke & Deane Borough Council (BDBC) and advisors Montagu Evans are reviewing options for the redevelopment of Basingstoke Leisure Park. NewRiver Retail is proposing to develop a outlet centre at the site and has undertaken a preliminary viability assessment of trading and rental potential.

Although present in the UK for nearly 40 years, outlet centres are still relatively rare as a format for new development. Detailed knowledge of catchments, trading performance and business drivers exists within a small number of specialist consultants, operators and investors. With project experience at FSP RETAIL BUSINESS CONSULTANTS more than half of the UK’s outlet centres and in more than 30 countries, FSP is recognised within the industry as Europe’s leading independent outlet 19 Manor Courtyard Hughenden Avenue centre advisor. High Wycombe UK, HP13 5RE

There are over 200 trading outlet centres which encompass nearly 5,000 T +44(0)1494 474740 occupiers and a wide variety of characteristics. Competition has spawned a F +44(0)1494 474262 [email protected] variety of formats (from shopping centres such as York Designer Outlet to retail parks such as Cheshire Oaks), price propositions (from luxury at www.fspretail.com Village to midscale at Talke) and brand mix (from schemes focussing www.snap-shop.co.uk on Assured fashion e.g. Guess, Tommy Hilfiger, Calvin Klein etc., such as York Designer Outlet to schemes focussing on Family fashion e.g. Clarks, Pavers, Marks & Spencer such as Junction 32, Castleford).

The keys to outlet centre performance are a strong brand line up (appropriate to visitors), a highly accessible site (ideally close to a motorway junction), a large (ideally affluent) catchment population, strong local tourism, limited competition, good design (including appropriate scale and an environment which appeals to both consumers and brands), nearby complementary activities and a strong operator.

Outlet shopping has more in common with leisure day trips than standard shopping trips. Visits are ‘speculative’ due to limited stock availability and the extended but much less frequent (quarterly rather than weekly) journey is often packaged with complementary leisure, cultural and social activities.

UK Outlet centres typically draw approximately 80% of shoppers from within 60 minutes. Basingstoke has 5.1 million residents within 60 minutes drive, above the UK average (3.4 million) and potentially sufficient to support a large outlet centre.

FSP has identified the M3 corridor between Basingstoke and Kingston Upon Thames as one of the last remaining opportunities for potential development of a large scale outlet centre in the UK. Competition (e.g. , and ) between 30 and 60 minutes of Basingstoke however, is severe and Basingstoke Designer Outlet (BDO) will require a strong draw plus an effective operator to attract visitors from the critical, highly populated areas beyond 30 minutes drive e.g. , South and West London.

The evidence submitted by New River Retail and Carter Jonas in support of BDO relies upon ‘top down’ assumptions of performance, drawn from largely anecdotal evidence from around the UK. In reality, the quality of the catchment, strength of competition and quality of operator determines the quality of brands and this in turn will drive performance at BDO. To date, a thorough assessment of commercial trading potential has not been provided to BDBC and without this, it is impossible to assess the precise income and capital value likely to be generated by BDO.

There is also uncertainty surrounding the likely operator as marked differences in performance exist between established UK operators. One potential FSP RETAIL BUSINESS solution might be to import an experienced operator from Europe or the United CONSULTANTS

States however, unfamiliarity with UK brands and consumers is likely to 19 Manor Courtyard undermine initial trading performance. There is then a danger that this legacy Hughenden Avenue High Wycombe prevents the opportunity at BDO from being fully realised in the future. UK, HP13 5RE

T +44(0)1494 474740 NewRiver Retail proposes that BDO would have gross lettable floor space of F +44(0)1494 474262 2 300,000ft , constructed and let in two phases. This provision would make [email protected] BDO the second largest outlet centre in the UK (after Cheshire Oaks) and the th www.fspretail.com 18 largest in Europe. FSP accepts that a large critical mass is required to www.snap-shop.co.uk draw shoppers from the critically important outer catchment (beyond 30 minutes) however, given the strong representation of upscale brands at Gunwharf Quays and Swindon Designer Outlet, developing BDO in two phases may, outstrip upscale demand. This would lead to dilution of the offer with midscale brands e.g. M&S, Clarks, Next etc., compromising the quality of offer at BDO and potentially impacting the full price offer in Basingstoke town centre. A more realistic construction program would include three development phases over a period of 5 to 6 years.

The line up of brands suggested by NewRiver Retail is highly aspirational and has more in common with Bicester Village than a more standard UK Designer Outlet. This is likely to be unrealistic as demand from luxury brands for outlet is finite (and largely satisfied in the UK), while many of the suggested brands are simply not present in UK or European Outlet Centres. A more realistic comparison with Swindon Designer Outlet or Gunwharf Quays suggests a broader proposition, with at least 45% of brands occupying the middle price point. This raises questions regarding the potential overlap with full price retailing in the town centre offer and a rigorous assessment by industry experts is required in order to produce a realistic list of potential occupiers for consideration by BDDC. As retail mix also drives rental income and development value, it is recommended that the tenant mix and brand line up exercise is revisited for the purpose of assessing the realistic value of the development.

While there is undoubtedly a strong opportunity to create a new outlet centre at Basingstoke Leisure Park, there are critical and unresolved questions concerning the operator, the suggested line up, the likely trading performance and therefore the assumed rental income and future site value. While it should be possible to establish a line up which mitigates potential impacts on the town centre, FSP recommends that the assumptions supporting the project should be further explored with a full commercial assessment of the outlet centre trading opportunity and potential occupiers by industry experts.

FSP RETAIL BUSINESS CONSULTANTS

19 Manor Courtyard Kenneth S Gunn Hughenden Avenue High Wycombe March 2016 UK, HP13 5RE

T +44(0)1494 474740 F +44(0)1494 474262 [email protected] Ken Gunn Director www.fspretail.com www.snap-shop.co.uk T+44(0)1494 474740 M+44(0)7773 779919 F+44(0)1494 474262 [email protected]