Morris Greenberg, Managing Director of Cedar Dean Group, addressed crowd’s at the firm’s second Join the Journey event with a snapshot of the leisure market:
It’s been a difficult couple of years as an operator with increasing rents, more turnover rents being introduced, outside the act leases becoming more of the norm, the business rates revaluation last April seeing sizeable increases for most London locations and Brexit – who needs it?
That is the exact sentiment we are getting from long-term operators and long-term restaurant chains. In 20 years of my involvement in the leisure scene, never have I seen so much stock coming to market. We have seen the likes of Byron, Strada, Subway, Wildwood and Jamie’s Italian all selling units and other long-established operators who have decided to implement their exit strategy.
Influx of supply
For those of you that read the latest Coffer Peach report, it was stated that Christmas trade for 2017 didn’t beat trade from 2016, which was a reflection in the poor trade for the whole of the year in general.
But there is a silver lining; In the past, the independents have competed against multiple national operators but there has never been such opportunity for exciting new and existing independent restaurateurs to take advantage of this climate. With the excess of supply we are seeing, dare I say it may lead to the softening of rents and premiums in some areas.
So, where is this happening? We have seen an influx of properties coming onto the market in areas such as Soho, Covent Garden and Marylebone. It seems to be the bigger sites that have been becoming available, therefore the smaller sites in proportion are commanding a larger premium than the bigger sites in most cases.
At our last Join the Journey event, David Abramson spoke about the 21 service rule; breakfast, lunch and dinner, seven days a week, therefore maximising service. For those operators - no matter the fit out or the concept – rents and premiums will stay strong.
But it is becoming more important for operators to go with the changing trends in particular areas, for example, Soho has become much more of a grab and go area for lunch as opposed to a sit-down lunch location.
At the Cedar Dean Group our experienced leisure agents are currently working with some incredibly new and exciting concepts which are coming to market or existing concepts that are doing well overseas and are choosing the UK for their International expansion.
We have seen that a healthy spin on the traditional fast food concepts at affordable prices are making a big impact: chicken, wraps, juice bars, burger and sushi concepts such as poke bars are among the type of operators expanding and entering the market. Once in, their trade is good, evidenced by the hunger for opening more sites
Unfortunately, due to the aforementioned effects of the economic climate, in some cases we have seen operators need to be out quicker than waiting for a sale. Alternatively, there might be some under-performing units within a large group that are detracting from the profitability of other units.
Our lease restructuring department, headed up by Lee Isaacs, are managing to achieve some fantastic results for operators, whether that be in the way of agreeing a mid-term rent reduction, refund of a rent deposit in order to help cash flow, mid-term rent free period or even a friendly surrender of the lease - giving time to the operator to try and improve trade and cash-flow or to try and achieve a sale. The point to be taken is that commercially minded landlords are beginning to realise that unless help is given to tenants they will end up with empty premises.
David Ford, who heads up our professional department, is getting some fantastic results on rent reviews and lease renewals against landlords who are still looking to achieve unsustainable rents. He is also succeeding with business rate appeals, achieving results for occupiers on discretionary rates relief. Recently, we have had two restaurants in Central London where rebates circa 7.5% of their current rates payable have been refunded in one lump sum.
The year ahead
In 2018 we are prophesying that while there will be more casualties in the way of the big chain operators or long-established restaurants looking to sell or surrender their leases rather than undergoing the expense of update or refurbishment.
But on the other hand an insurgence of bright new and amazing concepts will help drive our economy and encourage consumers to spend their hard-earned money on buying quality food, prepared for the high-end market, but priced for the mid-market consumer.
There has never been a better opportunity to grow a brand.