If real estate’s development story looks bleak at the moment, you might not be looking in the right places. Persisting in resilient niches has never been more important, although the project fundamentals remain of vital importance, according to Giles Membrey, managing director of Rioja Estates.
UK-based Rioja specialises in designer and factory outlet developments across the UK and Europe. The firm finds sites, takes them through the planning, design, development, funding, pre-leasing, operational launch and asset management phases, as well as identifying institutional purchasers for the finished schemes. Membrey remains relatively unfazed by the market’s macroeconomic markers, despite operating in retail (unfashionable) and development (unconscionable to some in the current environment).
‘Outlets do so well because everyone is feeling the pinch,’ he says. ‘Every pound is a prisoner. That means customers will spend more time and effort to get to an outlet to look for that value. They’ll drive further and stay longer, so you have to add good food and beverage (F&B) options to the mix to extend that spend and dwell time.’
Membrey is breezily open about the fact that factory outlets don’t necessary cost as much to construct as you might think, dubbing them as ‘posh front of house, and as cheap as possible back of house’. The expensive fit-out is in the hands of the brands, while outlet centre developers are essentially building boxes. That doesn’t mean that the finished product – usually thoughtfully landscaped, with a compelling mix of services and tenants – isn’t polished. ‘We spend a lot of money on landscaping, walkways, fountains… while also paying more attention than ever to sustainability,’ he notes. ‘That means being selective about the materials used and looking at renewable energy. Our Malmö scheme, which is currently under development, will be heated by ground pumps, making it virtually unique in the European outlet centre panorama. That will cost more upfront but result in lower fit-out and operating costs.’
Rioja’s Cannock development in the UK put beehives on its roofs, while the latest scheme in the works near Grantham is betting on electric vehicles (EVs). ‘Our Grantham Outlet Village has direct access to the A1 and 500 metres of frontage to a major motorway. We have 28 million cars passing our site annually, so even if we only capture 5% of that, that’s an extra 1.4 million visitors on top of the regular catchment. So we are looking at creating the largest EV charging centre in the whole of the UK Midlands, starting with 50 charging points and eventually growing to as many as 250 points.’
He adds: ‘The Highways Agency is extremely enthusiastic about it, which we can leverage to obtain signage from Peterborough to Doncaster along the A1. On top of that, we’ll offer shopping vouchers to those that stop to charge their cars, and we’ll also have hotels on the site for a retail-focused getaway.’
Construction will start on the Grantham site in April, with the opening following in two years’ time. Malmö will have a June start, with a launch planned for autumn 2025. Another scheme in Cork, Ireland, has just obtained zoning and planning permits are in the works, targeting a 2027 launch.
Membrey concludes: ‘It’s a highly risky business model as funds don’t put their hands in their pockets to buy the scheme until planning and leasing are well underway. The brands don’t always want to commit until they know who the final landlord will be, so it’s a Catch 22 situation. But if we’re confident about the market, the locations and the brands it can be wildly successful. We aim to maintain a small stake in the schemes where we can, but some investment funds want to take 100%, and we won’t argue with that.’