I wrote a piece in the middle of last year claiming the market was back. In essence, a reset was happening, in which landlords’ and tenants’ expectations were aligning.
That still remains the case in our experience, but it is worth remembering that it takes a lot longer for a market to reset downwards than it does to go upwards.
As 2024 gathers pace, however, I am starting to see an exciting new trend emerging.
Put simply, we are marketing some of the very best sites in Soho, Covent Garden and the City at the moment, and what has surprised me is that we have received offers above quoting terms and ERVs on two prime properties already.
But before you think I am rubbing my hands with joy, things might not quite be as they seem.
To understand the trend, it’s worth digging a little deeper into operators’ performances.
Reports from November last year revealed very strong trading, which carried on through December and Christmas period.
In fact, some trading was best-ever and it led to greater confidence emerging for many in the sector.
Yet it is not all a bed of roses, as evidenced by the reports this week that so many hospitality businesses are running with almost nothing in the tank to fall back on; the cost-of-living crisis has not gone away; and the cost-of-doing-business issues persist. Sadly, the industry remains one of haves and the have nots, with cash in the bank and profits being the two things every operator we speak to is focused on.
So we have more confidence tempered with the well known challenges of the past few years, plus the added issues of cash flow management.
Yet could there be some light at the end of the tunnel? Given the very impressive return of corporate acquisitions, the answer is perhaps. So many notable businesses have been bought recently, such as Big Mamma and Sticks’n’Sushi, both by McWin, as well as D&D London and The Restaurant Group. They all demonstrate an appetite for investment in hospitality, deliberate pun intended. Growth, either domestically, internationally or by way of franchise or partnerships are all showing potential.
Coming back to the prime sites in London and beyond, it starts to make sense that we will begin to see more competitive tension as the best operators tussle for the best sites to stay on the roadmap for profit. While times are still tough, change is coming.
