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JLL: Entertainment brands will sign leases for 9MM sq. ft. through 2024

Al Urbanski
Landlords favor experienced entertainment concept chiefs like Puttshack’s Joe Vrankin, ex-CEO of Topgolf.

Entertainment concepts continue to move into the nation's shopping centers.

Concepts such as Dave & Busters, Puttshack, and Sky Zone have filled lots of empty anchor spaces in American shopping centers. They currently occupy some 83 million sq. ft. of space and will be moving into more than 9 million sq. ft. over the next two years.

Increased demand for their expansion appears to be a sure thing. Americans are expected to increase their recreational spending by a healthy 10% in 2023, according to IBISWorld Forecast. But the leasing process for this tenant segment is more complicated than it is for supermarkets, specialty retail, and home goods stores, according to a new report from JLL.

Because so many entertainment concepts are brand new, landlords are more demanding in lease negotiations. They want evidence of strong average unit volumes at existing locations and executive teams with histories of executing brand launches successfully.

Puttshack, for instance, one of the fastest-growing “competitive socializing” brands that combines mini-golf with food and drink, is headed by Joe Vrankin, former CEO of Topgolf.

In addition, they want entertainment brands that serve the same demographic groups existing tenants do and that maintain steady streams of return business.

For their part, most entertainment concepts value locations near office parks as they rely on corporate events for significant revenue. Trampoline parks like Sky Zone want to be near family neighborhoods with young children, and nearly all brands enjoy locations in tourist areas.

Buildouts for entertainment tenants tend to be much more expensive than those for other center inhabitants. Tenant improvement allowances could add up to $400 per sq. ft. and high rents are charged to offset the allowances.

Many leases include a fixed base rent and an additional percentage rent that the tenant will pay if it successfully meets an agreed-upon sales threshold. This agreement assures the tenant that it will only pay a higher rent if its business is a success.

“New entertainment tenant leases are expensive propositions for landlords. There’s always the question of who’s going to be paying for the buildout,” said Kristin Mueller, JLL’s president of retail property management in the Americas.

Nonetheless, more and more of those negotiations are taking place. The JLL report noted that U.S. spending for dining out in 2022’s fourth quarter was 13.7% higher than it was in 2021. And spending at amusement parks and arcades grew by 20.6% year-over-year.

JLL identified eight key categories of entertainment tenants in its report:

Art installations & selfie museums: Museum of Ice Cream, Meow Wolf.

Barcades : Arcade games and alcohol,  Barcade brand itself being the prime example.

Competitive socializing: Puttshack, Bad Axe Throwing.

Eatertainment: Games, food & activities for 21+ crowd. Dave & Busters, Round1.

Escape room: Escape the Room, The Escape Game

Esports : Watch or play video games. Contender Esports, Belong Gaming Arena.

Trampoline parks and kid zones:  Play areas with burgers and pizza. Sky Zone, Kids Empire.

Virtual Reality : Computer-generated worlds. Sandbox VR, Latency VR.

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