The Subplot | Gaming bars, fixer-upper offices, seaside towns

Welcome to The Subplot, your regular slice of commentary on the business and property market from across the North of England and North Wales.

THIS WEEK

• Was it just a phase? Competitive socialising – virtual reality gaming bars, mini-golf – is growing up and, in the process, getting more complicated 
• Elevator pitch: your weekly rundown of who and what is going up, and who is heading the other way

THE PRICE OF FUN

Can you get bored with crazy golf?

The world of competitive socialising is calming down after a period of frantic growth. Is a more stable, thoughtful market good news?

Walljam, an interactive virtual football experience, is lining up 37,000 sq ft at Peel L&P’s 330,000 sq ft Trafford Palazzo. Peel is not alone in deciding to gamble on competitive socialising, big or small, relaxed or frantic. Spring saw the arrival of The Clubhouse – offering a relaxed mixture of food, shuffleboard, bowling, mini-golf and virtual reality darts – in the 4,400 sq ft former Gap unit at Meadowhall in Sheffield. Earlier this year, Grosvenor has signed Level Tap for a 6,500 sq ft e-sports venue at Liverpool ONE alongside a 100,000 sq ft Gravity Max entertainment centre. Even retailers are getting in on the act – Sports Direct devoted a slice of its 58,500 sq ft Manchester Arndale store to PlayStation and Xbox consoles.

More fun

According to Mintel, participation in competitive socialising is sharply up from 58% in 2019, to 71% in 2022. But that doesn’t tell you much, because the number of venues has gone up, too. There’s still plenty of action, but there’s no doubt things are in flux. “Competitive socialising was such a buzz with landlords a few years ago, but now it is merging more into general leisure,” Will Tait, senior surveyor at Colliers tells Subplot. “With virtual reality tech there are lots of opportunities to add competitive socialising and elements are appearing in pubs and in shops. But the hype these days isn’t the same.”

More complicated fun

The pool of operators is changing. The names that made news in 2020 and 2021 now have, more or less, all the UK units they want. Those operators are in the midst of international expansion – crazy golf business Swingers has just raised £40m for its US growth plans, suggesting investors fancy the idea. At the same time, a shift to virtual reality or screen-based gaming means operators often need less floorspace. Instead of 10,000 sq ft to 25,000 sq ft, requirements are more often 4,000 sq ft to 6,000 sq ft. Operators are also more fussy: big city centres are good, bigger satellite towns are fine, and everywhere else is generally not.

Less risky fun

This is mixed news for Northern landlords. As Subplot reported in March 2021 and April 2022, landlords – especially desperate ones – loved competitive socialising because the larger concepts were happy to take what was otherwise difficult-to-shift basement and first-floor space. On the other hand, a more mature market – and more sophisticated concepts – means landlords are hoping to get away with less of an upfront financial hit. During competitive socialising’s peak post-pandemic phase landlords were making capital contributions of £400,000-£700,000 and granting free rent for 12-18 months.

Who pays?

Rent-frees of this length are still common, but what one insider calls the “ridiculous capital contributions” of the last few years are rarer, though not gone altogether. Occupiers’ covenant strength and track records are improving, which makes everyone happy. “There’s maybe 10 requirements for central Manchester now, but that number is looking for much less floorspace than would have been needed two years ago,” says Colliers’ Tait. “They like quirky city centre space, but they won’t take the crap, and remember much of the better floorspace has already gone. But getting 10,000 sq ft in a city centre is challenging at any time, which is why basements and first floors are still of interest.”

Pick your fighter

Landlords now have a real but more complicated market to tap into. Peel L&P is taking Trafford Palazzo down a more leisure-themed route, but until now mall operators have been cautious about competitive socialising, preferring food and family entertainment centres – with some notable exceptions. Nerf Action Xperience took about 25,000 sq ft of what was to have been restaurants at Trafford Palazzo in 2021.

Across the road, the 1.8m sq ft Trafford Centre has gaming arena operator Belong whose units are generally under 10,000 sq ft. Namco Funscape, equipped with bowling and arcade games, took locations of about the same size as Nerf. This tally compares with Westfield, which has signed about 130,000 sq ft of competitive socialising since 2021, shared between White City and Stratford. Trafford Centre asset manager Pradera Lateral preferred not to talk about its competitive socialising lettings plan, but hinted about announcements.

Balls

While most concepts are getting smaller, some are getting bigger. It will be interesting to watch the progress of TOCA Social, the football concept, which needs about 35,000 sq ft per venue. A successful London venue prompted the announcement of a Birmingham outlet in 2021, which is due to open later this year. A third in London is also in the air. Will it make it to the North?

Funny ideas

Competitive socialising is also getting weirder. Big Fang Karaoke, an off-shoot of Liverpool’s Golf Fang, lands in the city this month promising “a world of music, technology, and nostalgia, all amidst a neon-lit Tokyo city. It’s a sonic slam of music and machine.

Gaze across the Atlantic and you’ll see the Museum of Ice Cream offering a backdrop for whimsical Insta-friendly selfies, jostling for landlord attention with more than 500 other emerging concepts, according to JLL. Meanwhile researchers at Savills have also spotted some odd stuff: whoever dreamed there’d be a mainstream niche for clay pigeon shooting? Savills expects more “white box” spaces to come forward, primed for an ever-changing range of immersive experiences. As proof, the firm points to the 30,000 sq ft Smurf Experience attraction at Oberhausen in Germany.

Fun for everyone

This is a restless market whose major players know you can only enjoy throwing an axe, or laughing your way round a crazy golf course, so many times before you yearn for novelty. The future: mostly smaller formats, often stranger, with frequent changes of content. Competitive socialising now has a place alongside family entertainment centres and more nerdy gaming arenas. It’s no longer the hot game changer some expected it to be in 2020.

ELEVATOR PITCH

Going up, or going down? This week’s movers

Bright young city folk at a think-tank say that bright young city folk are the solution for coastal communities, while old office blocks are catnip for cash-happy investors. Doors closing…

Fixer-upper offices

Regular readers will know that this month everyone is talking about office refurbishment. The latest contribution comes from Knight Frank. For its ESG Property Investor Survey, Knight Frank spoke to 45 private and institutional real estate investors active in the UK and Europe with about £300bn under management. More than half were looking for commercial buildings that perform poorly on sustainability, with an eye to buying and upgrading. The aim is to get them to energy performance ratings of C by 2027, and B by 2030 (as the law requires).

The gamble is that higher interest rates and lower valuations don’t matter if your purchase price isn’t very hot, and you get a nice green premium on the rent. Since the big institutions aren’t buying, and many rivals are priced out by the debt market, those with cash to spend (or cheap lines of credit) think they are onto a winner. Knight Frank say this is already happening in London where roughly half the H1 2023 office investment market fell into the fixer-upper category. There’s already evidence that investors are doing this in the North, as Subplot has reported. For now, the issue is supply of properties to refurbish. The Knight Frank survey says just 22% of investors were looking to offload their poor performing buildings – presumably preferring to hang on, and sort them out for themselves. Insiders hint that Manchester and Leeds could reach the unwanted bottom of the barrel sooner than many think.

Think tanking about coastal communities

Think tank Onward has done some pondering on the plight of coastal communities and come up with this list of problems: older populations, inevitably marginal locations and therefore less skilled workers, and, because plagued by seasonal employment, less wealthy economies. Onward’s solution is for a pilot programme for up to five coastal towns to set them on the path to economic transformation as twenty-something working-from-home paradises. In its words: “the government should also leverage the attractiveness of seaside living and the rise of hybrid working to create a new wave of ‘coastal neighbourhoods’ for young workers and families.”

To be fair, the thinkers also suggest a few short-term fixes, like making government pay for medical students to learn on the job in coastal towns and a clampdown on short-term holiday lets and substandard houses-in-multiple-occupation. New colleges and training will address the brain drain inland, it says, although without explaining why newly skilled people should stay put unless the jobs arrive at the same time as the qualifications. In the long-term, it looks like hopes are pinned on overspill from Didsbury and Chapel Allerton.

Get in touch with David Thame: david.thame@placenorth.co.uk