The UK's Commercial Leisure Economy
The renewal in the UK's consumer and housing led recovery has resulted in a very positive knock on effect for the leisure sector.
Consumer spending on leisure has remained resilient, with Savills forecasting that expenditure on leisure services will grow by 1.3% per annum over a period of five years. James Hurst of Savills Leisure stated “leisure will continue to be on investors’ shopping lists in 2014 and beyond”.
The strong housing market has inevitably had an impact upon consumer confidence, and this accompanied with increasing employment rates will only further improve leisure spending throughout the remainder of 2014 and the forthcoming year. Thus further recovery in the economy will inevitably result in boosting consumer spending priorities, with greater disposable income, Savills expect that spending on goods will rise per annum by roughly 3.5% and spending on leisure surfaces by 1.3% per annum.
The Restaurant Group being one of the sectors star performers. As highlighted by their recent results for the 52 weeks ended 29 December 2013 whereby the Group’s revenues grew by 9% to 358m, EBITDA has increased by 13% to £108m. Unsurprisingly, with such positive financial figures, private equity activity throughout 2013 was prominent, with the likes of Byron Burger and Cote securing prominent deals.
Within the restaurant sector, unsurprisingly, London is the primary focus. The capital now boasts an abundance of independent and pop-up brands appearing, such as Five Guys, Chipotle and Thai Pad. London is typically the facilitator for operators looking to expand further afield and with many operators now private equity backed, the ability and need to expend their current portfolios remain.
The Health & Fitness Industry total market value has grown by 1.5% to £3.92bn over the 12 month period to March 2013. Furthermore the sector had seen a 3% increase in the number of members. Savills claim this is the “dawn of a new age in the Health & fitness sector”. Within the last 12 months the sector has seen a surge in transactional activity compared to previous years.
With tenant demand for leisure schemes and locations continuing to grow, it is likely that the restaurant and Health & Fitness operators should continue expanding throughout the forth coming years. With various traditional high streets still unstable and struggling, retail and leisure parks together with shopping centres have become the new destinations of choice for both operators and investors.
This is evident as real estate investment into the leisure sector rose by 30% in 2013 and Savills boldly argues that there may become a deficit of prime usable space beyond 2014. The leisure sector will thus remain an integral component to the UK’s private equity market, as the demand remains, developments will continue with buying opportunities where traditional investment opportunities are likely to remain scarce.