Locations like Fosse Park in Leicester, the Fort in Birmingham and Monks Cross in York have been in existence for a decade now. They initially had a mix of bulky goods trades like carpets and furniture alongside variety stores like Bhs and WHSmith. But over the years their tenant mix has evolved with more mainstream fashion brands like Next, M&S and more recently Zara and Monsoon migrating from the high street and the mall.

And now a new generation of developments is taking this a step further. Fort Westwood Cross in Kent and Glasgow Fort have been designed with mainstream retailers in mind with a range of unit sizes. To all intents and purposes these are shopping centres.

Andrew Friend is director of property at Henderson Global Investors, specialising in the out-of-town sector. "Retailers don't draw a distinction between town centre and out-of-town any more," he says. "If they want a key location and they can't get one they'll take the other."

And in some cases they'll do both. Henderson owns stakes in the Bullring in Birmingham city centre and in the Birmingham Fort fashion park beside the M6, and Friend says the two trading locations have an increasing number of tenants in common. In the latest deal Marks & Spencer is taking a 35,000 sq ft store at the Fort, even though it is only a couple of miles from its flagship city centre store on the High Street.

Friend says the biggest challenge facing owners is creating the unit size that high street retailers can trade from comfortably. "Retailers requirements have converged," Friend notes. "On the high street it used to be 1,500 sq ft average and now it's nearer to 4,500 sq ft average. And out-of-town it used to be 10,000 sq ft and now it's come down to 4,500 sq ft."

Providing units of this size in a terrace of 10,000 sq ft units can prove problematical, but when it comes to new build developers are now looking to build in flexibility. For instance at the latest phase of its Craigleith retail park in Edinburgh -- which is in the process of being rebranded as The Quarry -- Henderson is providing units of 15,000, 12,000, three of 5,000 and one of 3,500 sq ft.

But even that's not cast in stone. "We're aiming for splittability," says senior development manager Geoff Harris. "We're dividing the units with 'soft' walls and bulding in the ability to move entrances and install mezzanines." And this is clearly striking a chord with retailers -- according to Harris only one unit of 5,000 sq ft remains available.

From an asset management point of view, Henderson is using the new phase as a catalyst for a general upgrade of the park. "We're bolting the new phase onto an existing park that has the right consent but not the right tenant mix," says Harris. "Once we're finished construction we'll be 'rightsizing' some of the other tenants."

In rental terms this will reap dividends for Henderson: the older units are let at £30 per sq ft, while some of the new space is under offer at £42.50 per sq ft. "This should be a £50 park," says Harris.

"Retail parks are opening up to a completely different raft of retailers," says Savills director Andrew Collier. But this in itself presents new challenges to owners, he notes. "The tenant mix is changing and the expectations of retailers are changing," he says. "For instance we're talking to Debenhams about their Desire format on a number of retail parks, and they expect the same approach and the same level of service from a landlord as they'd find in a shopping centre."

Inevitably though, there's a price to pay. Traditionally service charges out of town have been so low as to be almost negligible. But all retailers got -- if they were lucky - was a weekly litterpick in the planting and an occasional visit from a security company to make sure travellers hadn't invaded the car park.

However as the level of service increases so service charges are becoming an issue. "Service charges are £3.70 per sq ft at The Fort, against 40p to 60p on a traditional bulky goods park," says Collier. "But for that they get an on-site management presence, security, cleaning and so on. You have to demonstrate value to retailers."

And according to David Cook at Edgerley Simpson Howe & Partners changing occupier requirements are also changing the configuration of retail parks. "Eaves heights are going up from 6m to 8m to accommodate a mezzanine comfortably," he says. "And the frontage:depth ratio is changing -- retailer's don't need the block depth they once did." This means developers are looking to build units that are more square than rectangular, although in some cases this is restricting the amount of floorspace they can develop on a particular site.

So what of the future? It seems that the edges will continue to blur between shopping centres and retail parks. Projects like Glasgow Fort and Castlepoint have already shown the way but now developers are looking to go even further. Without revealing the location, Friend says Henderson is looking to totally redevelop some of its older parks. "We're looking at true mixed use, with residential, leisure and two levels of retail on an existing retail park site," he says.

Investment angles

Out-of-town retail has been one of the hottest investment sectors for almost a decade now. And even though retail generally is beginning to cool off, there's no shortage of investor demand for top quality retail parks.

David Cook at Edgerley Simpson Howe & Partners says the latest benchmark deal is Henderson's purchase of Shell Pension Trust's 12.5 per cent stake in Birmingham Fort, which he believes reflected an equivalent yield of 4 per cent.

As an existing investor in the park Henderson was a special purchaser, but the price implies that fashion parks are now more highly rated by investors than conventional shopping centres.

Strutt & Parker partner Duncan Good points out that a lack of stock is driving up values. "I'm sure that if a fashion park in the £60m to £100m size range came to the market now it would do better than 4 per cent."

But the prospects of that happening are slim, he believes. "All the big parks are now in the hands of the funds, and they won't be selling ahead of the creation of REITs," he says.

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