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DESTINATION EXPERIENCES: KEY TO A SUCCESSFUL INVESTMENT STRATEGY
COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
Chris WrightDirector | Destination Consulting
Valuation & Advisory | Asia+852 2822 0719
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
In cities around the world,
developers are seeking to create
unique destinations that will stand
out from the crowd. But as visitors’
expectations change and competition
increases, is there too much
emphasis on product (i.e. permanent
attractions) and not enough on
changing events and activities
programmes?
The importance of investing in “software”,
social infrastructure and the public realm to
create the conditions for appealing, people-
friendly spaces remains a live issue in
discussions about the future of real estate
industry and more sustainable forms of
urban development.
This trend mirrors the Colliers team’s interest
in providing balance between programme
and product as ingredients of successful
destinations – a perspective we have built up
through more than 20 years’ of working on
destination projects around the world.
In this article we highlight a selection of
different approaches to placing leisure,
culture and entertainment uses at the heart
of commercial real estate projects.
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
ADDING VALUE TO COMMERCIAL PROJECTS
MALL-BASED FEC CONCEPTS: BECOMING COMMONPLACE
Rides, games and immersive activities that will appeal to a wide age range
ENTERTAINMENT
ACTION & ADVENTURE
Sports and adventure activities such as climbing, sky diving and high ropes
EDUTAINMENT
Blending family entertainment (usually branded) with learning experiences for younger children
In our experience, however, the standard approach to delivering visitor attractions within commercial developments sometimes fails to maximise these opportunities.
A typical approach is to identify a space within a master plan for a leisure or cultural use and then to task the leasing team with finding the best tenant. This process inevitably favours proven leisure concepts that utilise well-known IPs and are backed by operators with a strong track record.
Destination experiences have the potential to add value to mixed-use projects in a variety of ways. The commercial rationale tends to revolve around three main points:
Attract additional footfall, increase duration of visit and boost visitor spending
Enhance destination image whether for investors, occupiers, employees, students, visitors or residents
Help to secure planning approvals, government buy-in or community support
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
CREATING A UNIQUE EXPERIENCE TO MATCH INVESTOR APPETITE
MAPPING DIFFERENT APPROACHES TO INVESTMENT
OPERATIONAL EXPENDITURE
CAPITAL EXPENDITURE
DEV
ELO
PER
INV
ESTM
ENT
PA
RTN
ER IN
VESTM
ENT
Parks andplay areas
Touringexhibitions
Theatre
Mixedperformancevenue
Sports events
Streetentertainment
Pop-ups
Showcases andpromotions
MarketsInteractive learning attraction(e.g. science centre)
Commercialedutainment(e.g. KidZania)
Largeaquarium
Indoorwater park
Indoor snow
Theme park
Small to mid-scalebranded attraction
Adventuresports
Active leisure(e.g. climbing,trampolines)
MultiplexCinema/ IMAX
Familyentertainmentcentres
What about developers who aspire to create a unique experience that will stand out in an increasingly crowded destination market? Delivering on this objective takes vision and imagination, as well as an appetite for greater risk.
The diagram here maps a range of different leisure experiences along two axes: capital vs. operational expenditure and landlord vs. operator investment. Understanding which part of the quadrant your project falls is key to ensure the viability of any destination.
The bottom right quadrant of the diagram shows examples of commercial leisure attractions. These options can usually be delivered and operated by a partner on a long lease, typically with some level of developer/landowner co-investment.
The examples in the bottom left quadrant are large-scale attractions that require substantial upfront capital investment. The biggest shopping malls in Asia and the Middle East have moved in this direction by incorporating signature attractions such as aquariums and indoor snow parks.
Located in the top half of the diagram are programme-driven experiences weighted more towards investment in on-going operations as opposed to capital-intensive facilities. These experiences require changing content to operate successfully.
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
THE CASE FOR ACTIVATION PROGRAMMES
EVENTS&
ACTIVITIES
Programmes of events and activities –whether indoors or outdoors – have some obvious advantages. Short term pop-ups and activations help to drive repeat visits, are flexible and can be quickly tailored in response to performance and audience feedback. This can enable more responsive, experimental and varied approaches than investing in fixed attractions.
What are the drawbacks? Curating a successful events and activities programme that will motivate visits throughout the year is no easy challenge. It requires a commitment to long-term investment in operations and delivery, including set-up costs to recruit and train a high-quality staff team and/or management fees.
That said, while a developer or asset manager will normally take the lead, there are often opportunities to involve partners in individual initiatives and to seek co-investment (both financial and in-kind). For multi-site operators, there is potential to share costs and roll out successful programmes across several locations.
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
DRIVING EVENTS AND ACTIVITES THROUGH PERMANENT VENUES
EXAMPLES OF PERMANENT, PROGRAMME-LED INVESTMENTS
Atelier des Lumières | Paris
Bridge Theatre | London
Fortitude Music Hall | Brisbane
A more ambitious approach is to invest in a permanent event, exhibition or entertainment venue. Commercial success for this type of flexible venue depends on a sizeable population catchment and a supply of content that will capture the public imagination. For most developers, working with an experienced partner is easier than starting from scratch.
Equally, a permanent venue needs to be more than a “black box” if it is to bring a destination to life. By externalising activity and animating the surrounding spaces, it is possible to reach a much wider audience and achieve greater impact.
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COLLIERS INSIGHTS VALUATION & ADVISORY SERVICES | ASIA | 25 SEPTEMBER 2019
NO “ONE SIZE FITS ALL” STRATEGY FOR SUCCESS
There are many approaches to creating a unique destination and no substitute for taking the time to understand the context, to carefully analyse market and financial feasibility, and to craft a business plan that will meet the specific objectives of each project.
For developers seeking new ways to differentiate their projects, events and activations are an important strand of a successful investment strategy. In our experience, however, programme-led options that require on-going investment are sometimes underexploited in commercial mixed-use developments.
The challenge, as always, is to demonstrate the added value of sustained investment through impact on visitor engagement, footfall and spending; perhaps aided by social media and data analytics tools that offer greater insight into visitor behaviour and impacts on trading.
A greater diversity of changing, surprising and complementary destination experiences within commercial projects – from specialist markets to theatre to urban beaches – is something we would all welcome.
About Colliers International Group Inc.
Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provideexpert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, havedelivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.
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Copyright © 2019 Colliers International
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for anyinaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
Primary Authors:
Chris WrightDirector | Destination ConsultingValuation & Advisory | Asia+852 2822 [email protected]
For further information, please contact:
David FaulknerManaging DirectorValuation & Advisory | Asia+852 2822 [email protected]
Govinda SinghExecutive DirectorValuation & Advisory | Singapore+65 6531 [email protected]
