1. Property in Retail and the Lack of Space in Concentrated Areas
Gareth Hudson – Head of Construction McDonalds Restaurant’s Ltd

2. Market Potential GAP analysis identified 323 gaps in 2013
88 openings to date – (30 in non identified gaps including 17 MSAs and 3 in-stores)
120 in current pipeline – (of which 33 in non identified gaps such as roadside sites, low no impact sites or MSAs)
189 gaps remaining – 60 in London plus 16 in South East the most challenging markets
Still huge potential for growth with there still being some towns with no McDonald’s at all (Bicester) or no drive thru (Guildford)
Many are opportunities for second or third stores where we are building capacity and relieving pressure on the existing DTs

3. Openings vs Pipeline
Significant increase in openings from 2010 – now stable at 25 openings per year
Pipeline has been big focus and now sits at 129 which presents a solid base for openings going forward

4. Lack of Retail Development Opportunity
Significant reduction in retail development
Supermarkets
Increased residential development driving
land value & competition for sites
Since 2011 significant reduction in the development of new out of town retail parks & supermarkets.
Supermarkets are not building new stores, and even if they do build like the photo of a new store in Chatteris they do not take occupation
Residential development has returned with associated impact on land values & competition for sites

5. Challenges Competition Site size & Site constraints
Discount food retailers
Increased Size Requirements
Unconditional Purchases
Drive Thru Coffee competition
Growth sector for coffee operators
Seen as more aspirational
Planning less controversial
Smaller & cheaper building
Site size & Site constraints
Visibility splays
No build zones
Minimum car parking numbers
Building Foot Print

6. Challenges Planning Conditions 30% increase in planning applications
Volume causing delayed registration with ripple effect on decision process
Impacting development timelines
Conditions
BREEAM
Energy
Recycling
Planning Policy
Planning and planning conditions are becoming more challenging
Increase in residential planning applications which are being prioritised over commercial causing problems
Local authorities are seeking more detailed conditions and there is an increased focus on energy efficiency, recycling and BREEAM.
Shift in planning policy also making applications more challenging

7. Planning Policy Longer time to determine decisions
Emerging policy creating exclusion
zones around schools/parks/youth facilities
64 local authorities with adopted or
emerging healthy eating policy
Increasing number of sites progressing to
Appeal - 6 in last 12 months
Emerging policies such as healthy eating coupled with more localism are making planning applications more difficult.
Result is that more sites are being progressed to appeal with associated delay and impact on programme.

8. Opportunities Micro building Needed to unlock opportunities in London
End of Terrace Conversions
Supermarket portfolios
Engaging with retailers on surplus space but slow progress
There are opportunities –
Micro building
End of terrace opportunities – like Luton
Supermarkets – we are engaging the with supermarkets on surplus space

9. Recent Openings

10. #1447 Maidstone - Broadway 1st drive thru in the town
Strong market and year 1 sales £4.52 m 158% over forecast
Challenging build as was formerly a car dealership & significant asbestos was found during construction impacting programme & cost

11. #1464 Barton Mills
Possibly the longest ever acquisition – eventually opened in Oct 2015
On target for £4.3m sales year 1
Very prominent roadside location on the A11

12. #1468 Banbury Gateway
End of terrace unit on a new shopping park anchored by M&S & Primark
No DTs available on the scheme & had to convince the developer to accommodate the DT lane adjacent to the service road
Bespoke design – demonstrates the art of the possible

13. #1460 Stratford-upon-Avon
Challenging town for DTs & out of town retail generally. Secured a very prominent location opposite the main out of town retail scheme.

14. #1471 Luton – Dunstable Road
Second DT in Luton a v strong market for McD’s. First DT was an E195 with limited car parking & no scope for a bump out of SBS/FF.
This is a converted end of terrace retail warehouse – demolished half to facilitate the DT lane as there was not enough room on the estate.
Building is constructed within the existing steel frame of the retail terrace & included the insertion of an upper floor.

15. Site Challenges & Solutions – Flexibility
Luton – a standard DT could not be accommodated in the car park. Loss of car parking too great & Next have a visibility splay across the car park preventing any building

16. Site Challenges & Solutions – End of Terrace Conversions
Only option was a conversion a vacant retail warehouse – had been vacant for nearly 5 years & there was an oversupply over 7,000 sq ft units in Luton

17. Site Challenges & Solutions – End of Terrace Conversions
Flexibility and a desire to work together from both landlord and tenant facilitated the development of a new DT – half of the former unit was demolished to accommodate the DT lane & a first floor inserted to provide the required space.
A demonstration of what can be done if both parties are prepared to work together.

18. Summary Challenges Single largest impact on deliverability is planning
Opportunities
Flexibility in building design
Traditional build
Evolution of the wider retail sector – supermarkets & consolidation of larger retailers
Largest challenges is the planning system – impact on deliverability of new stores
However there are opportunities out there –
And, if only one thing is certain it is that the retail sector will continue to evolve and opportunities will come out of this continual change.

19. Questions ???