& Shopping. Food Service MAY 10, 2016

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1 Food Service & Shopping Consumer spending on food service is growing faster than consumer spending on food and beverage retail in the US, the UK and Germany. The share of shopping center units dedicated to food service is higher in new malls than in older malls, and that share is expected to increase significantly in coming years. In Europe, food service s share of the total gross leasable area in malls will grow from 15% in 2015 to 20% by 2025, according to JLL. British and German consumers value food and beverage offerings at shopping destinations more highly than French consumers do. The growing presence of food service offerings in shopping centers could contribute to increased footfall, higher dwell time and greater spending. Shopping center owners such as Unibail- Rodamco, Westfield and Triple Five Worldwide are investing in dining experiences. Consumers say they would prefer to see more healthy and organic options in shopping centers rather than more fast- food offerings. DEBORAH WEINSWIG Managing Director, Fung Global Retail & Technology deborahweinswig@fung1937.com US: HK: CHN:

2 Table of Contents EXECUTIVE SUMMARY... 3 FOOD SERVICE IS GROWING IN PROMINENCE IN SHOPPING MALLS... 4 FOOD SERVICE GAINS SHARE OF TOTAL FOOD SPENDING... 4 FOOD SERVICE S SHARE OF MALL SPACE, BY COUNTRY... 5 FOOD SERVICE DRIVES MALL TRAFFIC... 9 SOME IMPLICATIONS OF MORE FOOD SERVICE WHAT SHOPPERS LIKE AND WHAT THEY WANT MORE OF MALL OWNERS INVESTING IN DINING EXPERIENCES COMPARING THE WORLD S BIGGEST MALLS BIGGEST MALLS BY COUNTRY SUMMARY MALL PROFILES SUMMARY PROFILES: RETAILERS AND FOOD SERVICE LOOKING AHEAD: KEY TAKEAWAYS

3 EXECUTIVE SUMMARY Food service is a growth market that stores and shopping centers can tap as they respond to shifting consumer preferences for more experiential retail offerings. Consumers in the US, the UK and Germany are growing their spending on food service faster than they are growing their spending on food purchases at retail. In Europe, property firm JLL said that food service accounted for approximately 15% of total shopping center space in The company expects that figure to rise to 20% over the next decade. At top malls in the US, the UK, Germany and France, food service outlets account for approximately 13% 19% of all units, and at newer malls, they are clearly taking a bigger share of space. This is particularly evident in the biggest malls in the UK, which, due to their relative newness, have allotted a comparatively high share of space to food service. The US landscape, by contrast, is characterized by older malls that have less space devoted to food service offerings. In Europe, property firm JLL said that food service accounted for approximately 15% of total shopping center space in The company expects that figure to rise to 20% over the next decade. In the US, food service accounted for just under 9% of total mall space in 2014 (latest), according to the International Council of Shopping Centers (ICSC). This proportion has increased slightly in recent years. A significant minority of consumers say that food service influences where they shop. Data from property firm CBRE show that food and drink offerings are important to 29% of British consumers, 26% of German consumers and 22% of French consumers when they choose where to shop. CBRE also found that consumers in Europe, South Africa and the UAE look for quality, value for money and speed of service when choosing where to eat or drink. Retailers that are tapping the heightened consumer demand for food service offerings include fashion stores Oasis and Urban Outfitters and department stores Debenhams and Nordstrom. 3

4 FOOD SERVICE IS GROWING IN PROMINENCE IN SHOPPING MALLS With the growth of omni- channel retailing and e- commerce, fewer consumers are shopping in stores and malls. At the same time, many consumers are seeking out experiences and spending more on leisure activities such as dining out. Accordingly, food service sectors in many regions are growing at a faster pace than food retail sales. Additionally, the share of total gross leasable area (GLA) dedicated to food service in shopping centers is increasing in a number of regions. Many major shopping mall owners are now investing in dining offerings as they follow the trend of making retail more experiential. In this report, we focus on: Comparing the growth of food service sales with the growth of food and beverage (F&B) retail sales. Food service s share of mall space. Why food service is important in shopping centers. Comparing food service offerings in the biggest and newest shopping centers in the US, the UK, Germany and France. Briefly profiling retailers that offer innovative food services on their premises. What shoppers want, and what they can expect from future shopping centers. FOOD SERVICE GAINS SHARE OF TOTAL FOOD SPENDING Across many countries, including the US, the UK and Germany, consumer spending on food service has grown more quickly than consumer spending on F&B at retail stores has. France is an exception: the most recent four- year CAGR available shows that growth in expenditure on F&B at retail stores was higher than growth in expenditure on food service in the country. Across many countries, including the US, the UK and Germany, consumer spending on food service has grown more quickly than consumer spending on F&B at retail stores has. Figure 1. F&B Retail Sales vs. Food Service Expenditure: Four- Year CAGR* 4.2% 3.8% 3.6% 3.4% 3.0% 2.1% 2.0% 1.5% US Germany UK France F&B Retail Food Service * CAGR for the US and the UK, CAGR for Germany, and CAGR for France. Source: Office for National Statistics (ONS)/Eurostat/US Bureau of Economic Analysis (BEA)/Fung Global Retail & Technology 4

5 Per- capita expenditure on food service is also on the rise in the four countries we analyzed for this report. The US leads in terms of both per- capita expenditure and overall spending growth for food service. In the UK, per- capita expenditure on food service was higher than in the US until 2014, but as the pound weakened in 2015 against the dollar, the US overtook Britain on this measure. Growth in per capita spending on food service in Germany was significantly higher than in neighboring France. Figure 2. Food Service: Per- Capita Expenditure (Left Axis) and Four- Year CAGR in Per- Capita Expenditure (Right Axis) USD 2,500 2,000 1,500 1, , % 2, % 1, % 1, % % 0 US UK France Germany 0 Per- capita expenditure on food service: 2015 for the US and the UK, 2014 for Germany, and 2013 for France. Four- year CAGR in per- capita expenditure: for the US and the UK, for Germany, and for France. Source: ONS/Eurostat/BEA/World Bank/Fung Global Retail & Technology FOOD SERVICE S SHARE OF MALL SPACE, BY COUNTRY Our data confirm that food service offerings are taking up a greater share of mall space. For this report, we analyzed food service s share of space in the top shopping centers in four markets: the US, the UK, Germany and France. Below, we show the averages of our data for the top five malls in the four major markets. Our data confirm that food service offerings are taking up a greater share of mall space. Figure 3. Five Biggest Malls per Country: Average Aggregate Share of Unit Numbers Accounted for by Food Service (Left Axis) and Average Year of Mall Opening* (Right Axis) % % 19.4% % 13.2% US UK Germany France 1970 *Or year of major renovation that substantially changed the nature or positioning of the mall. Source: Company reports/icsc/fung Global Retail & Technology 5

6 Largely due to average mall ages, the US sees a relatively low share of space devoted to food service, while the UK leads. The newness of the UK s top malls suggests that that country is the one to watch for emerging food service trends in shopping centers. The newness of the UK s top malls suggests that that country is the one to watch for emerging food service trends in shopping centers. Below, we show the correlation between the newness of shopping centers and the share of space taken by food service operations in them for the biggest shopping centers in the US and the UK. The pattern is clear: the newer the mall, the more space it has that is devoted to F&B offerings. The pattern is clear: the newer the mall, the more space it has that is devoted to F&B offerings. Figure 4. Biggest US and UK* Shopping Centers by GLA: Year Opened** vs. % of Units Dedicated to Food Service 2015 Wesgield Stragord City Bluewater Mall of America Wesgield London Intu Trafford Centre Year Houston Galleria Del Amo Fashion Center Intu Metrocentre 1965 South Coast Plaza King of Prussia % *We excluded Liverpool One from the UK data because it is an open- air center with a consequently higher food service proportion, and instead included Bluewater shopping center. **Or year of major renovation that substantially changed the nature or positioning of the mall. Source: Company reports/fung Global Retail & Technology 6

7 Major property firms have published data that are broadly in line with our findings: Our figures for the UK, Germany and France in total are broadly in line with research from property firm JLL: in 2015, JLL said that food service accounts for approximately 15% of total European shopping center GLA. The company expects that figure to rise to 20% over the next decade. Ten years ago, UK shopping centers would typically have given over just 7% of GLA to food service, according to research by property firm CBRE. The potential for European malls is hinted at by Asia, where food service accounts for an average 25% of mall space, according to CBRE. The firm says that percentage will become more normal in many centers outside Asia in the coming years. German mall owner ECE says the total floor area of F&B outlets at its centers jumped by 38% between 2010 and 2015, and that the number of F&B contracts in its centers rose by 43% over the same period. According to Cushman & Wakefield, restaurants accounted for one- third of unit or store growth in the US in 2008 and 2009, but in 2016, the number is closer to 50%. In the UK, property firm Savills found that major out- of- town shopping centers had the highest proportion of food service units compared to selected other forms of retail: food service operations accounted for some 14% of major UK shopping centers total units, Savills reported in 2015, basing its figure on Callcredit Information Group data. The potential for European malls is hinted at by Asia, where food service accounts for an average 25% of mall space. Figure 5. UK: Food Service Units as Proportion of Total Leisure Units, % 11% 11% 8% Regional Out- of- Town Shopping Centers City Centers Large Retail Parks Overall Total Food service is defined as café, takeaway and restaurant units. Total leisure units include retail; entertainment and hotels; and pubs, bars and clubs. Source: Savills/Callcredit Information Group/British Council of Shopping Centres (BCSC) The Macro View of US Mall Space and Food Service According to the ICSC (and as charted below), food service s share of US malls sales is greater than its share of square footage. The segment s sales- value advantage appears to have been squeezed a little in recent years: as the share of space accounted for by food service has increased, the share of mall sales has tended to decline. 7

8 Restaurants represent the majority of food service offerings at US malls by space and, consequently, by sales. Food courts are losing share of malls total sales and square footage in the US. Figure 6. US: Food Service s Share of Mall Sales % 11.4% 11.1% 11.1% 11.3% 10 % Fast Food Food Court Restaurants Source: ICSC Figure 7. US: Food Service s Share of Mall Square Footage % % 8.6% 8.7% 8.7% 8.8% Fast Food Food Court Restaurants Source: ICSC 8

9 Space occupied by food service within a mall yields higher- value sales than retail space does, on average. According to the ICSC, the average annual sales productivity (i.e., sales per square foot) for food service in US malls was $618 in 2015, versus $487 for retail space. Space occupied by food service within a mall yields higher- value sales than retail space does, on average. Figure 8. US: Annual Sales Productivity for Non- Anchor Mall Tenants $ USD 500 $ Total GAFO* Food Service *GAFO is general merchandise, apparel and accessories, furniture, and other sales. Source: ICSC FOOD SERVICE DRIVES MALL TRAFFIC A quality F&B offering can yield three major gains for shopping centers: increased footfall, higher dwell time and greater spend. A quality F&B offering can yield three major gains for shopping centers: increased footfall, higher dwell time and greater spend. Figure 9. Food Service Gains for Shopping Centers Increased Foogall 30% of consumers across 22 markets say they somemmes visit a shopping center just to eat or drink. Higher Dwell Time European shoppers who eat spend 27 minutes longer than average in shopping centers. Greater Spend European shoppers who eat spend 18% more than average in overall transacmons data Source: CBRE/JLL/Fung Global Retail & Technology For a significant minority of consumers, food service influences where they shop. Data from CBRE show that F&B offerings are important to British and German consumers when they choose where to shop, but less important to French consumers. Research published by ECE in 2016 showed that 40% of Germans choose a shopping center according to its range of food outlets. 9

10 Research published by ECE in 2016 showed that 40% of Germans choose a shopping center according to its range of food outlets. Figure 10. Selected European Countries: Percent of Respondents Agreeing with When I m choosing where to shop, the availability of food and beverage is very or extremely important to me. (2015) 29% 26% 22% UK Germany France Source: CBRE Although F&B offerings clearly drive footfall to shopping centers, how much retailers gain from the increased traffic is less straightforward, particularly because the traffic converts to shop visits at different rates in different countries. On this measure, once again, the UK and Germany lead. In France, relatively few visitors say they always visit shops, even if they visited a shopping center to eat and drink. The BCSC says the presence of food service offerings typically results in increased dwell time in a shopping center overall, but in a reduction in the number of stores visited. The BCSC refers to this as a substitution effect, whereby a visit to a food service operator replaces a visit to a store. 10

11 Figure 11. Selected European Countries: Percent of Respondents Agreeing with I almost always visit shops when I get to a shopping center, even if the main reason for my visit was to eat and drink. (2015) 47% 32% 14% UK Germany France Source: CBRE Incremental spend is another gain: European customers who eat during a shopping center visit spend, on average, 18% more overall, according to JLL. And data from CBRE show that roughly one- quarter of total shopping center spend in major European countries is on F&B, although the average spend on F&B in malls varies by market. European customers who eat during a shopping center visit spend, on average, 18% more overall. Figure 12. Average Per- Person Total Spend and F&B Spend per Shopping Center Visit, UK Germany France Total Food and Beverages Source: CBRE SOME IMPLICATIONS OF MORE FOOD SERVICE While mall owners that dedicate more space to F&B see positive gains in terms of footfall and average spend, there are complexities involved, including: Lower rentals: According to the BCSC, food service has traditionally underindexed versus retail in terms of rental income so, any move to switch space from retail to F&B risks denting mall owners income. However, anecdotal data cited by the BCSC in the UK, including comments by food service operators, indicates that the rental gap has closed somewhat. Moreover, ICSC US data (shown earlier) indicates that food service outperforms in terms of sales value (not rental income) in US malls. 11

12 Longer leases: The cost of fitting out food service units is typically higher than the cost of fitting out retail units. Thus, leases for the former tend to be longer than for the latter, the BCSC reports. On balance, we think that mall owners must look at the bigger picture, and at the important role food service plays in driving consumers to shopping centers. It may be economically preferable to focus on retail, but it is no longer realistic, given that shoppers now expect a range of quality food service offerings to be part of their shopping experience. We think that mall owners must look at the bigger picture, and at the important role food service plays in driving consumers to shopping centers. WHAT SHOPPERS LIKE AND WHAT THEY WANT MORE OF According to a 2015 survey by CBRE, consumers in Europe, South Africa and the UAE look for quality, value for money and speed of service when choosing where to eat or drink. Figure 13. Top 10 Factors that Are Important or Very Important to Consumers When They Are Determining Where to Eat or Drink, 2015 Quality of Food Value for Money 75.1% 69.1% Quick Service Conveniently Located Comfortable Seamng Atmosphere Healthy Opmons Deals, Offers or Promomons Good Lighmng Child Friendly 56.3% 53.4% 51.7% 51.4% 43.3% 40.5% 33.9% 28.6% Base: 22,000 consumers across 22 markets in Europe, South Africa and the UAE. Source: CBRE 12

13 The top category of food offering that consumers would like to see more of is healthy/organic options, according to CBRE s 2015 survey: some 45% of respondents across 22 countries named these, versus just 17% who said they wanted more fast- food outlets in shopping centers. Since consumers are looking for novel, healthy and unusual food options, mall owners will need to respond with offerings that go well beyond traditional food court fare. The top category of food offering that consumers would like to see more of is healthy/organic options. Figure 14. Top 10 F&B Options or Establishments that Consumers Would Like to See More Of, 2015 Healthy/Organic Opmons 45.1% Innovamve Food Offerings 42.5% Independent Restaurants 35.2% Pop- Up Restaurants or New Concepts 34.3% Independent Coffee Shops or Cafés 32.6% Child- Friendly Opmons 31.4% Juice s 31.1% Ice Cream/Dessert Opmons 27.3% Food Courts 25.1% Vegetarian/Vegan Opmons 23.5% Base: 22,000 consumers across 22 markets in Europe, South Africa and the UAE. Source: CBRE Many of the biggest real estate companies that own and run malls have identified and responded to the growing consumer demand for lifestyle and dining offerings. MALL OWNERS INVESTING IN DINING EXPERIENCES Many of the biggest real estate companies that own and run malls have identified and responded to the growing consumer demand for lifestyle and dining offerings: Unibail- Rodamco, the largest commercial real estate company in Europe, is introducing The Dining Experience in its existing and new malls. Land Securities, a British commercial property company, named the growth of food and leisure offerings in malls as one of the top global shopping center trends in omni- channel retailing. Westfield, one of the leading shopping center companies in the world, discovered that 81% of shoppers consume at least one coffee, snack or meal while out shopping. The company has invested in apps where customers can preorder food and collect it at a mall s food court. 13

14 COMPARING THE WORLD S BIGGEST MALLS As noted earlier, for this report, we analyzed the F&B offerings in the five biggest shopping malls each of four countries: the US, the UK, Germany and France. These malls were deemed biggest based on the ICSC s GLA rankings. Below, we also look at one new mall in each country, to see how it compares with the other five. The average age of malls in the US is comparably high, and the sector is rather mature in the country, so few new malls are opening. According to real estate research and advisory firm Green Street Advisors, the so- called A malls (characterized as the dominant malls, housing luxury in- line and anchor tenants, in top markets with strong demographics) in the US are performing well, while C and D malls (characterized by low sales productivity, a large mix of regional and local retailers, and declining occupancy) are struggling. In A malls, food service offerings are generally more high- end, and fast- food and takeaway outlets are few or nonexistent. We summarize our data on the top malls, country by country, below, and then offer brief profiles and further data for each country. Our data show that most F&B units in malls in the US and the UK are restaurants, while German malls have a higher share of fast- food and takeaway restaurants. Bakeries are particularly common in German and French malls. Many malls, such as the Mall of America in the US, are undergoing or planning expansions and modernizations that include more lifestyle and dining offerings. Our data show that most new malls have a higher share of retail space dedicated to food service than older malls do. BIGGEST MALLS BY COUNTRY The US The Mall of America dominates the list of the biggest shopping centers in the US in terms of size and number of stores and F&B units. The share of food service in the selected US malls we analyzed ranges from 12% to 16%. Figure 15. US: Selected Shopping Centers Metrics Mall Total Units F&B Units % Share of Total Units Total GLA (Mil. Sq. Ft.) Annual Footfall (Mil.) Year Opened Mall of America South Coast Plaza King of Prussia Del Amo Fashion Center Houston Galleria NEW MALL: The Mall at University Town Center N/A 2014 Source: Company reports/icsc/fung Global Retail & Technology 14

15 Restaurants and fast- food/takeaway outlets are the most common types of F&B units in these US malls, except in the two upscale (A) malls, South Coast Plaza and The Mall at University Town Center, where restaurants dominate. The figure below charts the unit breakdown of food service in these six US malls. Figure 16. US: Selected Shopping Centers F&B Unit Numbers by Type, April Mall of America 35 South Coast Plaza 53 King of Prussia 35 Del Amo Fashion Center 41 Houston Galleria 19 The Mall at University Town Center Café Fast Food / Takeaway Frozen Yogurt Ice Cream Juice Restaurant Smoothie Snack Source: Company reports/fung Global Retail & Technology The UK Figure 17. UK: Selected Shopping Centers Metrics Food service s average share of total units in the biggest malls in the UK is higher than its average share in the other countries we analyzed. In part, this is likely due to the relative newness of these UK malls. In addition to the five biggest malls, we looked at Trinity Leeds, which opened in 2013 and has the highest share of F&B units of the total (39.2%) among the UK malls we analyzed. Mall Total Units F&B Units % Share of Total Units Total GLA (Mil. Sq. Ft.) Annual Footfall (Mil.) Year Opened Intu Metrocentre Intu Trafford Centre Westfield Stratford City Westfield London Bluewater NEW MALL: Trinity Leeds Source: Company reports/icsc/fung Global Retail & Technology 15

16 The figure below charts the unit breakdown of food service in these six UK malls. Restaurants, prominently influenced by international cuisine, are the majority type of F&B units at malls in the UK. Figure 18. UK: Selected Shopping Centers F&B Unit Numbers by Type, April Intu Metrocentre Intu Trafford Centre Wesgield Stragord City Wesgield London Bluewater Trinity Leeds Bakery Café Fast Food / Takeaway Frozen Yogurt Ice Cream Juice Milkshake Restaurant Smoothie Snack Source: Company reports/fung Global Retail & Technology Germany Figure 19. Germany: Selected Shopping Centers Metrics According to German business magazine Handelsblatt, there are over 20 new shopping malls scheduled to open in Germany between 2016 and 2021 unlike in the US, where the shopping center landscape has reached maturity, and mall growth is slow. Mall Total Units F&B Units % Share of Total Units Total GLA (Mil. Sq. Ft.) Annual Footfall (Mil.) Year Opened Ruhr Park Paunsdorf Center N/A 1994 CentrO Mains- Taunus- Zentrum NordWestZentrum N/A 1987 NEW MALL: Aquis Plaza N/A 2015 Source: Company reports/icsc/fung Global Retail & Technology In half of the German malls we analyzed, restaurants are the majority type of food service; in the other half, fast- food and takeaway outlets dominate. A large portion of F&B operations in German malls are Asian influenced or fast- food outlets. According to a shopper survey by ECE, Asian cuisine, at 37%, is the most preferred type of cuisine among German shopping center customers, followed by fast food, at 35%. 16

17 Figure 20. Germany: Selected Shopping Centers F&B Unit Numbers by Type, April Source: Company reports/fung Global Retail & Technology 23 Ruhr Park Paunsdorf Center CentrO Main- Taunus- Zentrum France 24 The five biggest French malls have the lowest combined average share of units dedicated to food service, at 13.2%, of all the different countries malls we analyzed. 21 NordWestZentrum 20 Aquis Plaza Bakery Butcher Café Fast Food / Takeaway Frozen Yogurt Ice Cream Restaurant Smoothie Snack Figure 21. France: Selected Shopping Centers Metrics Mall Total Units F&B Units % Share of Total Units Total GLA (Mil. Sq. Ft.) Annual Footfall (Mil.) Year Opened Belle Épine La Part Dieu Les Quatre Temps Grand Littoral Créteil Soleil NEW MALL: Polygone Riviera N/A 2015 Source: Company reports/icsc/fung Global Retail & Technology Restaurants represent the majority type of food service in the French malls we analyzed, except at Grand Littoral, which has more bakeries and cafés than restaurants. Overall, bakeries are particularly popular in French malls. 17

18 Figure 22. France: Selected Shopping Centers F&B Unit Numbers by Type, April Belle Épine La Part Dieu Les Quatre Temps Grand Liworal Créteil Soleil Polygone Riviera Bakery Café Fast Food / Takeaway Frozen Yogurt Ice Cream Juice Restaurant Smoothie Snack Source: Company reports/fung Global Retail & Technology 18

19 The US SUMMARY MALL PROFILES Figure 23. US: Selected Shopping Centers F&B Unit Numbers Breakdown, April 2016 Café Fast Food/ Takeaway Frozen Yogurt Fruit Ice Cream Juice Restaurant Smoothie Snack Total Mall of America South Coast Plaza King of Prussia Del Amo Fashion Center Houston Galleria The Mall at University Town Center Source: Company reports/fung Global Retail & Technology The largest shopping mall in the US, the Mall of America, is the most- visited tourist attraction in the country, welcoming over 42 million visitors annually. Located in Minnesota, the mall prides itself in setting the model for combining retail and attractions under the same roof. Triple Five Worldwide, which owns and manages the mall, is planning to expand it by the end of 2018, with a focus on lifestyle offerings and activities, including fine- quality restaurants and bistros. South Coast Plaza s food service offerings differ significantly from the Mall of America s, and there are no fast- food restaurants at the California mall. According to the Orange County Register, McDonald s was one of the last fast- food restaurants to operate at the mall, and its lease ended in South Coast Plaza is one of the most high- end A malls in the US. King of Prussia, near Philadelphia, is one of the largest malls on the East Coast. Simon Property Group, which manages and owns of the mall, is currently expanding it. The new area, which will include new signature dining experiences, is set to open in August Restaurants represent the most common type of food service unit at the mall. Del Amo Fashion Center, which is also operated by Simon Property Group, is located in Torrance, California. Compared to its rival Californian mall, South Coast Plaza, Del Amo Fashion Center has a wider range of mid- market food offerings. The Galleria, in Houston, is the largest mall in Texas and one of the largest in the US. The mall has more fast- food and takeaway restaurants (17 units) than it does regular restaurants (14 units), which is different from the other American malls we analyzed. Opened in 2014, The Mall at University Town Center is an upscale shopping and dining destination, and one of the newest malls in the US. Located in Sarasota, Florida, the shopping center is surrounded by affluent, gated golf communities. Similar to South Coast Plaza, restaurants are the dominant type of F&B outlet at this mall. 19

20 The UK Figure 24. UK: Selected Shopping Centers F&B Unit Numbers Breakdown, April 2016 Bakery Café Fast Food/ Takeaway Source: Company reports/fung Global Retail & Technology Frozen Yogurt Ice Cream Juice Milkshake Restaurant Smoothie Intu Metrocentre Intu Trafford Centre Westfield Stratford City Westfield London Bluewater Trinity Leeds Snack Intu Group s Metrocentre, in Gateshead, is the largest shopping mall by GLA in the UK. A food and leisure zone called the Qube opened in 2009 with a mix of restaurants and an IMAX cinema. In spring 2016, an extension to the Qube was opened, with nine new restaurants, including burrito, Bella Italia and TGI Fridays. Restaurants represent the majority of food service outlets at the mall. Intu Group s Trafford Centre is a shopping and leisure center in Greater Manchester, and at 65%, a significant proportion of the mall s visitors are shoppers in the ABC1 demographic groups (upper middle class to lower middle class). The mall s food court, the Orient, is one of the largest in Europe. In addition, Debenhams, John Lewis, M&S and Selfridges all have restaurants within their department stores at Trafford Centre. Located in East London, Westfield Stratford City is the largest urban shopping mall in Europe. The mall was opened next to the 2012 Olympic Park, which is open to the public for sporting and social purposes. Almost half of the food service units at the mall are restaurants. Another Westfield mall, Westfield London, is undergoing an expansion, and when it opens in 2018, it will be the largest shopping mall in Europe, at 2.6 million square feet. Almost half of the food service offerings at Westfield London are restaurants (32 units). Bluewater shopping mall is located in Kent, just outside London, and is surrounded by lakes. According to Land Securities, which partly owns and manages the mall, Bluewater s visitor catchment is one of the most affluent in the country. Trinity Leeds, which opened in 2013, is one of the most recently opened shopping malls in the UK. It is owned and managed by Land Securities and has the largest share of food service units out of total units, at 39%, of the UK malls analyzed in this report. More than half of the food service operators at Trinity Leeds are restaurants. The shopping center won the ICSC s VIVA (Vision, Innovation, Value, Achievement) award in 2015 for innovation and design for turning an existing shopping destination into a retail, leisure and nighttime destination. Total 20

21 GERMANY Figure 25. Germany: Selected Shopping Centers F&B Unit Numbers Breakdown, April 2016 Bakery Butcher Café Fast Food/ Takeaway Frozen Yogurt Ice Cream Restaurant Smoothie Snack Total Ruhr Park Paunsdorf Center CentrO Main- Taunus- Zentrum NordWestZentrum Aquis Plaza Source: Company reports/fung Global Retail & Technology Located in Bochum, Ruhr Park is the largest open- air mall in Germany. In November 2015, the redesigned mall opened with new restaurants. Bakeries still play a significant part in the German food service market, and Ruhr Park has six bakeries serving fresh bread and takeaway food. Paunsdorf Center, in Leipzig, is the largest shopping center in central Germany. Almost half of the food service outlets at the mall are fast- food and takeaway restaurants, and they include hotdog and currywurst outlets. CentrO calls itself as the biggest shopping and leisure center in Europe. Located in Oberhausen, the mall has one of the largest food courts in Europe and a 400- meter promenade for restaurants, bars and clubs. Coca- Cola is a key partner, and the shopping center s Mediterranean- style food court is called Coca- Cola Oase. Main- Taunus- Zentrum, near Frankfurt, was one of the first major shopping malls in Germany when it opened in During the mall s most recent expansion and modernization, it was refurbished in Mediterranean style, with new cafés and restaurants, according to ICSC. Many of the restaurants at the mall are influenced by Asian, Italian, Mexican and Turkish cuisine. NordWestZentrum, in Frankfurt, is one of the largest urban shopping centers in Germany. It is the only German mall we analyzed where restaurants (13 units) represent more than half of the food service offerings. Opened in October 2015, Aquis Plaza is one of the newest shopping centers in Germany. Approximately 70% of the retailers made their debut in the city of Aachen at the mall. Aquis Plaza has a food court and three separate restaurant areas. ECE, the owner of the urban mall, has highlighted it as not only a shopping destination, but also a culinary destination. 21

22 FRANCE Figure 26. France: Selected Shopping Centers F&B Unit Numbers Breakdown, April 2016 Bakery Café Fast Food/ Takeaway Frozen Yogurt Ice Cream Juice Restaurant Smoothie Snack Total Belle Épine La Part Dieu Les Quatre Temps Grand Littoral Créteil Soleil Polygone Riviera Source: Company reports/fung Global Retail & Technology Located in South Paris, Belle Épine is the largest shopping mall in France in terms of total GLA. During its most recent modernization, in 2015, the mall was refurbished with new facades and new interior design. It is managed by real estate company Klépierre. The share of units dedicated to food service at Belle Épine is approximately 11%, which is one of the lowest among the malls analyzed in this report. Located in Lyon, La Part Dieu is the third- most- visited mall in France. Restaurants (12 units) are the most common type of F&B operation at the mall, followed by fast- food/takeaway outlets (10 units). Les Quatre Temps, in West Paris, is the most- visited mall in France. Unibail- Rodamco, a commercial property company that owns the mall, has been investing in a concept to make its malls dining destinations. At the launch of the Dining Experience at Les Quatre Temps, famous Michelin- starred chef Thierry Marx performed an interactive cooking show for mall visitors. Grand Littoral, in Marseille, has the lowest share of food service units as a percent of total units of the malls analyzed in this report: 9%. The mall houses more bakeries (4 units) and cafés (4 units) than fast- food/takeaway restaurants (3 units) or restaurants (2 units). The number of visitors at Créteil Soleil, in Eastern Paris, has increased by over 2 million since its most recent modernization in Klépierre is planning to further expand the mall by the end of The first lifestyle mall in France, Polygone Riviera, was opened in October 2015 in Cagnes- sur- Mer. The mall combines shopping with contemporary art and leisure. The mall s owner, Unibail- Rodamco, introduced the Dining Experience concept at Polygone Riviera, as it had at Les Quatre Temps earlier in SUMMARY PROFILES: RETAILERS AND FOOD SERVICE Apart from the various dedicated food service offerings in shopping malls, many retailers have started to either offer F&B in- store or enhance their existing in- store F&B offering. Some names, such as Hotel Chocolat, have extended their brands into stand- alone restaurants. 22

23 TOMS, a shoe and eyewear retailer, recently expanded into the coffee business, with the launch of TOMS Roasting Co. The company s business model has been referred to as the one for one concept : TOMS gives a new pair of shoes to a child in need for every pair of shoes purchased. For every pair of eyewear sold, part of the profit is used to save or restore the eyesight of people in developing countries. Similarly, with every TOMS Roasting Co. purchase, TOMS helps provide safe water to a person in need. TOMS Roasting Co. coffee is available at TOMS Outposts and selected Whole Foods stores as well as in the company s 13 in- store cafés. Source: Fung Global Retail & Technology 23

24 Ralph Lauren opened its first in- store café in 2014 at its New York City flagship store. The decor of the café is inspired by an American boathouse and a Parisian bistro. The café is not, however, the company s first food service business RL Restaurant opened next to the Ralph Lauren store in Chicago in The company also runs a bar in New York and another restaurant in Paris. Source: Ralph Lauren Womenswear retailer Oasis opened a café and bar called Saucer & Spritz in its flagship store in central London at the end of The outlet offers a selection of hot and cold breakfasts and lunches, and cocktails in the evening. Source: Fung Global Retail & Technology 24

25 American fashion retailer Urban Outfitters opened its first in- store coffee bar at its Fifth Avenue store in New York City in Forbes reports that the retailer is planning to expand into the casual- dining sector, and the company announced in late 2015 that it had acquired the Vetri Family group of restaurants. Source: Sprudge British department store chain Debenhams recently said that it will be introducing more food concession counters in its stores. The retailer discovered that customers who eat in- store spend at least 40% more than those who do not. Source: Fung Global Retail & Technology 25

26 American retailer Nordstrom, which has performed better than many of its competitors, has 16 different themed restaurants and specialty coffee shops in over 200 locations, including full- service bistros, espresso bars, and juice and smoothie bars. Source: Nordstrom British chocolatier Hotel Chocolat operates concept restaurants and cafés in the UK and Denmark. The Hotel Chocolat Roast + Conch restaurant concept and menu are inspired by Saint Lucia, a Caribbean island where the company also grows its own cocoa. Source: Hotel Chocolat 26

27 In major markets such as the US and the UK, consumers have continued to grow their spending on F&B faster than they have their spending on retail. LOOKING AHEAD: KEY TAKEAWAYS With the sustained growth of e- commerce, more and more functional shopping will migrate online, while physical retail will increasingly be focused on experience. Retailers and mall owners will need to work harder to attract customers to physical stores, while shoppers will be looking for experiences that they cannot get from e- commerce. In major markets such as the US and the UK, consumers have continued to grow their spending on F&B faster than they have their spending on retail. In the US, apparel has already been hit by this change, and in the UK, retail has recently seen a significant slowdown that could signal a major shift of spending from retail to services. More retailers and mall owners will seek to tap consumers new willingness to spend on dining out at the expense of making retail purchases. Mall owners cannot look only at the pure economics of allotting space to retail versus food service: consumer preferences and spending priorities mean that providing a quality F&B experience is more essential than ever. Food service will have a greater footprint in new malls: the American Dream megamall set to open in New Jersey in 2017 will have more dining and culinary options than any other shopping center in the US. 27

28 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: John Mercer Senior Research Analyst Filippo Battaini Research Associate Janne Eho Research Assistant Nila Conzen Research Intern HONG KONG: 10th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: LONDON: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) NEW YORK: 1359 Broadway, 9 th Floor New York, NY Tel: FBICGROUP.COM 28