Outlet centres outperform wider retail market

28 Feb 2019

By Miles Gibson

The outlet sector is continuing to outperform wider retail. In this blog we outline the key themes of this success.

The outlet sector is continuing to outperform wider retail. The flexible lease structure, with strong landlord controls and the capacity for operators to achieve a swift return on investment through increases in sales, is particularly attractive to investors. The discount model seems to resonate increasingly with shoppers and outlets have positioned themselves appropriately while also providing a high-quality leisure experience.

In our Retail Property Perspective we delve deeper into the sector to understand the key themes we are seeing in the market, where investment has been focused in recent years, and our expectations for future growth.

Recent performance

Following trends in the full price sector, outlets are increasingly polarised into the best and the rest. The top tier of around 10-12 outlets continues to strengthen and attract the strongest brand line up, with the highest discounts, and drawing from the largest catchments. Outlet sales grew at a faster pace than all shopping centres in recent years. The better UK centres recorded close to double digit sales per year between 2012 and 2017 and Bicester continues to dominate the sector as the only true luxury outlet in the UK, generating sales densities higher than any other mall in the world.

The increasingly challenging shopping centre market, which is extensively covered in the Property Perspective, has provided opportunities for landlords to convert some or all space to outlet centres – such as with the top level of Princes Quay in Hull.

Brands’ growing sophistication in using ‘made for outlet’ to supplement excess stock, and avoiding cannibalisation of trade at nearby locations, has driven growth in more urban areas such as London to access major populations.

Future importance

To improve their attractiveness and extend dwell time, many outlets are increasing their food & beverage and leisure offering. Peel Outlets rebranded to Lifestyle Outlets, reflecting a desire to attract families as a leisure destination, and Icon Outlet at The O2 (the largest entertainment arena in the world) has delivered premium outlet shopping to a leisure destination. This could well be a model for future developments.

The sector’s enviable track record over the last decade has attracted investor attention. Once solely the domain of outlet operators backed by UK-based institutional capital, the investor base has now diversified to include REITs and global capital. Yields are now on par or at a premium to shopping centres, with limited investment opportunities ensuring continued depth of demand.


2018 saw only one new outlet open (Phase 1 of The Icon at The O2). 2019 will be made up of extensions and it is not until Cannock and Scotch Corner open in 2020 that we will see a new outlet join the hierarchy. 2021 should see new outlets in Glasgow and Grantham but beyond that date it is hard to predict supply. We estimate a conceivable long-term pipeline beyond 2022 of around 85,000 sq m across four to five outlets.


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