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But the motive is different from IKEA HAS VIEWS ON ROOMS


Investing in property is nothing new for Inter IKEA Group, owner of the IKEA brand. The company, a separate entity from the IKEA retail operation, set up a property division around 20 years ago to generate long-term income. After an initial foray into the hotel sector, it last year set up a new company – Inter Hospitality – to focus on the sector. In March this year, Inter Hospitality announced a tie-up with Marriott to build and own hotels in a dedicated investment portfolio that will be operated under Marriott’s new MOXY three-star hotel brand. The contract is non-exclusive, but Inter Hospitality has first refusal on the 50 hotels the joint venture partners aim to build in the next five years. The first is due to open in Milan by mid-2014 and Inter’s managing director Peter Andrews hopes to have at least a dozen properties under way within the next 12 months in the UK, Italy, Germany, Austria and Belgium. Andrews and his team are scouting


for sites that can accommodate 50,000- 100,000 sq ft buildings (equating to between 150 and 300 rooms) in city centres, at airports or near transport hubs. Inter is looking at both freehold and leasehold (25 years upwards) ownerships. Andrews expects modular construction to bring down build times to as little as nine months. If the brand takes off Marriott is likely to roll the chain out to other countries and is already stating an ambition for 150 MOXYs over the next decade.


TESCO STICKS ITS NECK OUT


Tesco’s outright purchase of the family- run 15-year-old Giraffe chain has given the food retailer an instant portfolio of around 50 stand-alone restaurants, operating mainly in southern England. Where future Giraffes will be located remains to be seen – Tesco rather vaguely says that the first restaurant to open next to Tesco will be “near London” and has given a similarly imprecise timescale for opening as “later this year”. The grocery giant was also unable


to speak directly to Estates Gazette about the floorspace size and physical positioning of new restaurants. But


Tesco’s. Inter IKEA, which owns the IKEA brand, is not itself a retailer, so involvement in the creation of MOXY Hotels (see box) was driven by long-term investment potential. Peter Andrews, managing director of Inter Hospitality, explains: “We see a window of opportunity at the moment. Sensible site prices mean we can offer a good product and still get a decent investment return. The branded economy hotel sector is forecast to grow at a stable rate, in spite of the financial crisis, with continued growth in people travelling for both work and leisure meaning we can expect increasing demand from people who need somewhere to stay.” Inter Hospitality’s move underlines the


rosy outlook for at least some segments of the leisure sector; could that persuade some retailers that they should be


diversifying into non-core activities. I don’t think they will move away from focusing on getting the most out of the latest retail trends.” That does not necessarily mean that


Tesco will be the only major retailer owning or investing in leisure uses. The other big supermarket chains, which have previously experimented with leisure partnerships and concessions (McDonald’s in Asda, for instance) may well be tempted to follow suit if Giraffe works out well for Tesco. Sainsbury’s and Waitrose are tipped to


be next in line to consider branching out into branded leisure. For them, finding a brand that has


synergies with their existing business model will be crucial. Helen Bunch, managing director at fit-out firm Wates Retail & Interiors, says: “Some parts of a leisure operation are similar, but others


“Retailers are not becoming leisure operators – they are simply looking for cost-effective ways to increase footfall and dwell time”


diversifying their operations in that direction, backed by their own, or shareholder, cash? So far, the answer appears to be no. Adrian Leavey, commercial property partner at law firm Trowers & Hamlins, says: “Retailers are not diversifying in the traditional sense. What we are seeing is some large-space occupiers, like Tesco, exploring innovative ways to make the most of space and increase their bottom lines with add-ons. These retailers are not becoming leisure operators – they are simply looking for cost-effective ways to increase footfall and dwell time, and owning a coffee shop, restaurant or maybe even hotel in the vicinity of their stores can help them accomplish this.” Mark Underwood, partner at


Deloitte Real Estate, agrees: “Most retailers are trying to concentrate on their core business rather than


in a Tesco blog group commercial director Kevin Grace says: “With more general merchandise moving online, we have a great opportunity to rethink how we use the space in some of our larger stores.” The suggestion seems to be that Giraffes may be fitted into existing redundant space. However, later in the


same blog, Grace says: “Where possible, Giraffes will sit adjacent to or outside the main Tesco store – we want the dining experience to feel separate from the weekly shop


are fundamentally different to retail.” So it is unlikely that we will see 10-pin


bowling or cinemas operated by retailers any time soon. A retailer-owned gym chain is considered a possibility by industry experts, though most agree restaurants are the most likely candidates. However, simply buying a successful


brand today is no guarantee of success tomorrow, warns Paul Bishton, managing director of Birmingham-based retail specialist Redleaf. He says: “Getting it right is very difficult and history is littered with failures. Capital expenditure costs per sq ft are huge compared to retail and it is too easy to lose control of costs at any time during the life of the business. “In addition, there are many things


that can go wrong with food quality and service, so even a great brand can fail if it does not deliver at store level.”


because it is a place where customers can take a break and relax.” Details of how and when the Tolley family- owned (and Tesco- backed) Harris + Hoole coffee shop chain will be integrated with supermarket stores are similarly sketchy. But in a separate blog Tesco chief executive Philip Clarke says: “When the Tolleys are ready, we will


put them into some of our stores.” The Australian Tolley family launched their business last year and currently have 14 outlets, all in south-east England.


Summer 2013 www.estatesgazette.com 25


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