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Leisure is Bouncing, Splashing and Flexing Into Birmingham Industrial Space

Swimming pool created in former industrial unit by Swim!
From industrial unit to swimming pool: the Swim! fitout

Leisure operators are grabbing Birmingham industrial floor space — and it could mean big changes for the city’s shed scene.

For landlords it is a massive opportunity to diversify their portfolio — even if it strains the Midlands' already limited supply of small and mid-box industrial units. In some locations they can claim premium rents up to 30% to 40% above the normal prime industrial rent.

For leisure tenants from gyms through trampoline parks to swimming pools it means a quick and perhaps low-cost route to expansion driven by a surge in spending as UK consumers delve into the “experience economy.” According to Barclays data the leisure sector doubled in size between 2011 and 2016 and contributed about £200B to the U.K. economy last year.  

Industrial space means leisure operators with a host of (sometimes weird) “experiences” now have a simple route to market, tempted by rents that can be as much as 50% down on those of standard leisure units.

There is nothing weird about the latest operator to signal a move into Midlands industrials, new entrant Swim! They are looking for 3.5K SF to 8K SF Birmingham units with 20 or more car parking spaces and a concrete floor. The floor needs to be good because the 20 metre by 7 metre steel stank they install is heavy — more than 140 metric tonnes.

Swim! — which already has a unit in Warrington — will soon open in Sheffield and Leeds, and plan 18 more across the North and Midlands.

“We’re looking at warehouse space providing the yards are OK, but we will also take standard leisure units," said Dove Haigh Phillips partner Simon Dove, who is advising Swim!. "It all depends on cost, and of course the warehouse space is often the cost-effective option.”

Trampoline park operated by Gravity at British Land's St Stephens Centre, Hull

Trampoline park operator Oxygen Freejumping is also looking closely at the Midlands. It already has outlets in Wolverhampton and Derby. Dedicated leisure parks are their ideal location and units 20K to 60K are preferred, but if the cost-effective answer is ex-industrial floor space, Oxygen is happy to look at it.

“Industrial units are not our principal strategy but you’re balancing parking, convenience, other leisure and retail activities in close proximity including food and beverage offers for extended dwell time, which all come on leisure parks or retail schemes," Oxygen Chief Financial Officer Ross Chester said.

"You have higher rents there versus industrial units, which are cheaper space but generally less parking, less visibility to the consumer and not generally on a natural commuter road. You have to do your homework first. And of course the competitive environment frames all of this.”

TNT lorries HGV vehicles

The Midlands' industrial landlords are responding. London & Cambridge Properties have just won planning consent for their first industrial-to-leisure change of use at the 2.5M SF Pensnett Estate, at Kingswinford. The D1 leisure consent comes ahead of a letting to a gym.

LCP do not expect Pensnett to become heavily dominated by leisure users — quite the contrary — but they are prepared for higher leisure penetration at other sites. Their 262K SF Stourbridge estate is now roughly 30% leisure, LCP asset manager Matt Pegg said.

“We’ve an estate close to Stourbridge, and it is absorbing pressure from Stourbridge town centre next door, so we carved off one section of the estate for leisure including a skate park and trampolines. But the far end of the site is reserved for the big wagons.”

“At Pensnett my conclusion would be that overall, leisure is not going to be a massive thing on the site — it is not a sea change.”

It is unclear how much UK industrial floor space has been converted to D2 leisure use. Data from JLL in London — where the trend is more advanced — suggests use is growing fast but remains modest as a proportion of overall floor space: for instance, JLL say just 256,000 SF in London is devoted to trampoline parks today and JLL predict further losses of industrial space to D2 leisure use.

Like the gym and trampoline park operators, the mathematics of leisure occupation fascinates LCP, and could prompt more leisure deals.

“What happens next all depends on values, but if leisure users pay enough to mark it worth landlords’ while getting planning permission, and making the necessary improvements to infrastructure and signage, then why not, especially on smaller industrial sites closer to the more affluent towns,” Pegg said.

Pressed to say if there were any leisure uses LCP would refuse to consider, Pegg refused to rule out anything. “The leisure market continues to surprise us,” he said.

Crazy golf? Canadian axe throwing? They could be coming to a Midlands industrial estate near you any day soon.