Pubco leases are mirroring the trend of greater rent free periods and increased break clauses seen in the wider commercial lease market, according to property agents, writes Gurjit Degun.
Data from the British Property Federation’s (BPF) Annual Lease Review found commercial landlords are offering “the most flexible lease regimes ever” — and pub property agents report similar trends in the pub world.
The BPF Annual Lease Review and a separate study from the Investment Property Databank (IPD), found that in real terms high street shop rents have fallen by more than a third over the past 20 years. Average rent free periods in leases increased to 13.4 months in 2010/2011 and the average length of leases including break clauses, increased from 8.6 to 9.4 years, after two years of decline.
Christie+Co director and head of pubs Neil Morgan said the current market has also forced pub landlords to adopt a more flexible approach, and said that some landlords are having to offer break clauses and rent free periods.
He said: “If the landlord is staring down a barrel or if they’re going into administration, then they would probably reduce rents, and others are reducing rents to attract a better operator. But if the pub is in a prime circuit, and it has a lot of interest, why should the landlord be flexible?”
Fleurets director of pubs Simon Hall said that a lot of tenants are opting for five to 10-year leases rather than 30-year leases because “they don’t want to be tied to a site for too long”.
Guy Simmonds managing director Stephen Taylor said the surge of private buyers taking on pubco disposal sites and leasing them onto tenants has forced more flexibility into the market.
He believes some of this culture is branching out to pubco landlords. “Pubco landlords are becoming more pragmatic because of market forces,” he said.
“Some pubco leases are still taking in a healthy profit, but sometimes the rent is too high.”
