How much would you pay for a prime central London site? Well if you are US burger chain Five Guys looking to make your UK debut, the figure is rumoured to be close to £2m for Novus Leisure’s Long Acre bar site between Covent Garden and Leicester Square.
And Five Guys is not alone. Mews of Mayfair is believed to have secured 3Sixty Restaurants’ Rocket site in Mayfair for a fee that the venue would have taken 10 years of trading to reach, while the Leon in Old Compton Street is understood to have changed hands for around £1.2m.
Indeed, one agent tells me that within days of the Leon deal being agreed to further Old Compton Street operators approached him to see if he could garner interest on two sites valued by themselves around the £750k mark. It seems supply in central London will not be an issue.
As one senior operator said: “There are just some figures you can’t turn down, especially when the funds can be used for refurbishing a number of sites or acquiring a few elsewhere.”
18 months ago, London was seen as a safety blanket for all the ills operators were suffering out in the regions. Don’t go outside the confines of the M25 was the call. Fast forward to the here and now and the mood has changed thanks in no small part to the prices being generated for prime central London sites.
While fledgling groups, such as street food operators, work around the edges, able to be more flexible in space and position needed, it is these international groups and high-net-worth individual-backed concepts, which are competing for the larger, high-profile units.
As Ted Sharma, joint managing director at leading advisory firm Shelley Sandzer, points out: “Operators are looking at paying £100 a square foot in the capital, whereas out in the regions it is closer to £60. There aren’t many, if any, half a million premiums being paid outside of London.”
For established operators facing limited scope for expansion in the capital, eyes have turned to shopping centres and new schemes, such as The Brewery in Dorchester, to fill roll out quotas. High street location in places such as Lincoln, Leamington Spa and Plymouth are being reassessed.
Paul Newman, co-head of leisure & hospitality at Baker Tilly, said: “While the potential reduction in cost of capital is good news for operators, an abundance of well-funded businesses now competing for sites could well result in increased rents and premiums. This is particularly relevant for inside the M25, which could be reaching a tipping point, despite continuing to demonstrate above average growth in both like-for-like and total sales. We would not be surprised if this results in a greater share of outside the M25 site openings throughout the course of the year.”
And what can operators find outside of the capital. Well not only can they take advantage of better property deals, there is also cheaper overheads and in some places less competition, although this may soon change, with Cote and Bill’s looking to stretch their legs nationally.
Operators such as Patisserie Valerie, Prezzo, Loungers and The Restaurant Group have taken advantage of the London-bias focus of others to get ahead regionally, increasingly helped by the number of retail units that are currently on the market. Prezzo and TRG will both look to open 25 new sites this year, few, maybe a Chimichanga or Coast to Coast flagship site, if any will be in central London.
The recalibration in terms of consumer spending has continued in the first quarter of the year. Whisper it, but more stability is being shown across the country, with consumers looking to eliminate unnecessary retail spend, while retaining a degree of much-needed leisure spend.
Some companies may look for a quick win in terms of growing their regional footprint, which may lead to consolidation amongst categories as smaller chains continue to find it harder to grow in the current climate.
The call use to be: if in London stay in London. For many it is increasingly, go North, South, East or West.
