Outlet Malls: Inoculated Against The Diseases Afflicting UK Bricks-And-Mortar Retail?

What does outlet mall retailing have that the rest of the UK’s brick-and-mortar retailing doesn’t? The answer is, it is inoculated against dangerous online threats.

So said McArthurGlen Managing Director for Leasing Nick Brady, as the global outlet mall developer prepares to open its first UK mall in 20 years.

The £160M West Midlands scheme will be the seventh British centre in its portfolio, joining its outlets in Ashford, Bridgend, Cheshire Oaks, East Midlands, Swindon and York. It will be the group’s 26th centre across Europe and in Canada. 

In one sense, the timing could not have been worse. The 285K SF West Midlands mall will open after a leasing campaign half of which took place during the coronavirus pandemic.

Tenants include Coach, Kate Spade, Hugo Boss, Levi’s and Lacoste joining Gant and Radley, Under Armour and Nike.

The development is funded by 55% by Aviva Investors together with the Richardson family oand McArthurGlen itself.

Brady said the e-commerce free environment was a powerful draw to retailers and part of the rationale for expansion.

“What we sell just isn’t available online,” Brady said. “Brands still want to showcase their product in physical retail, and the outlet channel is a key part of their distribution. Brands take a conscious decision on what outlet space they need relative to their full-price retail portfolio. It brings them new and additional customers.”

McArthurGlen is not entirely allergic to online tools, but they are kept firmly in their place. At the West Midlands mall they will offer the queue management app ‘By Appointment’ to enable guests to book times in participating stores and join real-time virtual queues from their smartphones. There will also be a mobile wayfinding service 'Mappedin' to enhance in-centre navigation. McArthurGlen’s customer insight programme ‘How Was Your Day?’ will also be live to capture real-time shopper feedback.

The result has been a stream of signings since the pandemic began in March 2020. The outlet mall is now around 70% let.

“We started building the West Midlands outlet, then we had Brexit, then we had the pandemic, and both have shown the robustness of the business model and the location we chose, because we’ve a very impressive list of brands signed up, particularly given we had two those major incidents during construction,” Brady said.

The key to success has been turnover-based leases, now a subject of growing debate in the traditional UK retail sector. “Turnover rents mean a different mindset. We have to think about the brand mix and the consumers we want to target, and it means with the retailers that it is not a case of them-and-us,” Brady said.

“There’s no special pixie dust making this work, it is just a straightforward turnover mechanism and that is part of the beauty of the business. We need to understand how brands are performing, to understand their brand strategy, and what is changing in their life. So we talk weekly, monthly. It’s a true sit-down business plan.”

McArthurGlen has around 650 turnover leases in the UK ranging from two, five and 10 years in length with a minimum base rent.

As well as the West Midlands mall McArthurGlen is opening at Paris-Giverny (France) and Remscheid (near the German cities of Cologne and Düsseldorf).