Rocketing rents and rates are “unmanageable” for 84% of London restaurateurs, a survey has revealed.
Cedar Dean Group (CDG) spoke to around 600 restaurants, with 90% of operators saying if rents and rates increased as forecast, costs would be unsustainable for business.
Restaurants are spending an average of 21% of their turnover on rent, instead of 12% the maximum they can generally afford, and up from 16% last year.
Leisure property experts Cedar Dean has called for collaboration between landlords, Government and leisure industry leaders to action change and implement an affordability statement.
The survey found 90% describing the forecast increase in rents and rates as high or unsustainably high - up from 60% in last year’s report.
Industry veterans expect a rise of at least 20% in rent after their next review, with business rates expected to rise to reflect the current rent bubble after the forthcoming review.
Just 16% of restaurateurs said they were confident that they would be able to carry on with business as usual if the rents and rates trends carry on as forecast.
Some 30% said they would have to move away from central London, while 54% said they would have to close.
Cedar Green suggests that if operators are forced to do as they say and leave central London, remote central kitchens on the cheaper outskirts will become more prevalent, reducing the space needed for prep and allowing more space for diners.
However this could have a knock-on effect on the food quality and dining experience, Cedar Dean said.
The group also raised the prospect of reverse premiums, with a risk that businesses tied to the lease may be forced to pay new tenants to take it off their hands.
An exodus from London would benefit regional cities such as Bristol, Leeds, and Manchester – but at the expense of the capital world-renowned leisure scene.
CDG has called on the Government, landlords and tenants to work together to and subscribe to an “affordability statement” which ensures rents and rates of an operator do not exceed 25% of turnover.
David Abramson, chief executive of Cedar Dean, said: “We always knew that the upward only rent review system created a cliff edge ending for operators but these latest statistics are must worse than what we saw a year ago, with the average rents comprising 21% of turnover of and average rent and rates together at around 30%.
“There simply isn’t enough profit in the mix for hardworking operators. The reasons for the rental increases are partially due to a small number of very exceptional supertraders who can simply pay rents that others can’t.
“In the London market, we see that premises with rents above £250,000 are struggling to change hands a bit akin to the high-end residential market as there is a fear to generate, the levels of turnover needed due to consumer volatility.
“With these statistics showing 84% of operators currently see their rent and rates as unsustainable, we turned to the Westminster Property Association for help and for them to consider their Corporate Social Responsibility in lobbying landlords for affordable rents.
“Our suggestion was to urge landlords to take turnover into account when giving new leases or executing rent reviews – rather than the historic application of a pounds per square foot basis which has put so many operators out of business. Their response was that such an affordability statement could reduce footfall and undermine successful operators - something we fundamentally disagree with.
“One thing the last few months has shown is that high rent and rates are not just affecting businesses that need to improve but also operators that invest substantial sums in the capital city including the likes of Ripley’s, Believe it or Not, Jamie’s Italian and Byron.
“We are already seeing a lot of the innovation going to the east and south of London where levels are more affordable.
“It is plain and simple the numbers just don’t add up. Without intervention, the restaurants will be forced to close their doors and by the time landlords wake up it will be too late.”