Photo by Mike Petrucci on Unsplash
A growing variety of retail entertainment concepts are attracting consumers – and therefore also operators, developers and investors – but even as entertainment spending increases, many obstacles need to be overcome, according to a new report from JLL.
“Consumers want fun experiences,” the report says, “and entertainment concepts plan to open new locations to give them what they want.”
The dollars are there, says JLL. In the fourth quarter of last year, spending on restaurants in the United States jumped 13.7% year-on-year, while spending on amusement parks and amusement arcades jumped 20.6%. % year-on-year.
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The most popular category, “eatertainment,” offers food, drink, and multiple games in one place and is expected to see the most new locations. Dave & Busters, for example, is one of the legacy brands. Promising new concepts include Andretti Karting & Games, Fat Cats and EVO Entertainment.
The virtual reality (VR) and “competitive socializing” categories, a single game with food and drink, are estimated to have the second and third highest number of planned opens. Brands to watch are Immersive Gamebox, Sandbox VR, and Zero Latency VR, and Puttshack, Chicken N Pickle, X-Golf, and Flight Club, respectively.
Over 9.1 million square feet of entertainment planned in the United States and Canada. Graphic courtesy of JLL Research
Many of these concepts require substantial space, and JLL has identified 9.1 million square feet of new entertainment space slated to open in the United States and Canada over the next two years.
Economic barriers
So it’s a huge potential, but there are also obstacles.
These larger spaces that many concepts require are expensive to build, assuming the raw space can be found. JLL warns that the biggest hurdle in landlord-tenant negotiations is the amount of money the landlord has to contribute in up-front construction dollars, while tenant improvement allowances for an expensive concept could cost up to $400. $ per square foot.
Higher upfront construction costs naturally lead to higher rents over the term of the lease, typically 10 to 15 years. In an environment of rising interest rates, this therefore favors owners and tenants who can avoid borrowing.
In short, says JLL, landlords want a proven concept led by a strong team and/or backed by a solid business plan, creditworthy tenant (Puttshack secured $150 million in growth capital from BlackRock last year ), a tenant who fits into a global vision project and the possibility of repeated visits to the tenant.
