Chained and bound

Whisper it very quietly, but while times have been tough, the pubs and restaurants sector is holding up pretty well.

The slowdown in the UK economy and a struggling tourist industry have undoubtedly hit home.

Many of the large, branded chains have curtailed expansion plans following a spate of profits warnings. And the market has been knocked by the failure of established chains in London and the South East to transfer their success to the regions.

This has particularly been the case at the higher end, notably the difficulties faced by Groupe Chez Gerard and Fish!, with value for money, mid-market chains back on the menu.

As Paul Breen, associate director at Colliers CRE, puts it: "In the face of difficult times economically, people in Birmingham and Manchester have proved unwilling to use corporate bank accounts to pay £30 to £40 per head for lunch."

While demand continues to rocket at prime pitches across the UK's cities, secondary sites have found the going tough, particularly with rents showing little sign of falling.

Majority interest
Breen explains: "In 1997 to 1998, at the peak time for the market, we were sending out specs for schemes to 15 to 20 operators and receiving interest from the majority. Nowadays we usually have three or four names in mind."

Nevertheless, there are signs that things are picking up. Breen has been encouraged by a growing trend for regional operators to chance their arms elsewhere, pointing to Manchester-based vodka bar group Revolution's recent opening of outlets in London's Soho and Clapham as an example.

Tracey Mills at Davis Coffer Lyons, believes things could be a lot worse.

"There's been too much playing down of a market that is bearing up quite well. While we have seen consolidation among established brands, we've also seen plenty of new concepts stepping in to plug the gap," says Mills.

According to Mills, the market has become so diversified it's difficult to pin down trends.

"Certain pitches will be dominated by large, national brands, while others, for instance the Canal Basin development in Edinburgh, work best with a mix of small local operators, which give credibility to a scheme, and the larger brands."

Trevor Shelley at Shelley Sandzer, agrees that it's not all doom and gloom away from the prime pitches.

He says: "The market has become more fragmented. But in London, in the backwaters of places like Fulham, Dalston or up and coming areas like Hoxton, as well as cities like Bristol and Oxford, we are seeing a lot of activity, as strong demand has never seen enough supply."

On the high street, the local pub is rapidly disappearing, replaced by "gastro" pubs and bars.

Breen says that groups are demanding larger floor spaces, with the likes of Regent Inns, Luminar and Wetherspoons guaranteed to take a large chunk of the local custom. He states: "On the high street, we're seeing units typically being taken with ground floor space of 6,000-7,000 sq ft with ancillary space."

The large operators have increasingly focused on one brand, shedding chains that are considered non-core business.

It's a move that has been encouraged by the City, which Breen says "prefers to see operators with one tried and tested brand rather than a jack of all trades that is master of none".

The need for harmony
In central London it seems that the market is in a state of flux while Westminster council and the mayor for London do battle over the planned reform of the UK's licensing laws.

Existing businesses with late licences are being snapped up, but deals are falling through where liquor, late night and public entertainment licences cannot be secured. A notable recent case has been Regent Inns' decision to pull out of a Walkabout/Jongleurs and Surfers Night Club development at Leicester Square's former Home nightclub.

Shelley says: "There needs to be harmony between different sectors of government before we can predict the future. What the market is asking for is compromise and common sense."

What is certain about the future, Breen says, is the need for operators to continually look at ways of keeping their product fresh.

"On the high street brands have an increasingly short shelf-life. Unless they continue to update what they offer, they will soon be out of step with the market."

Licensed and Leisure Property Supplement, September 2002

A joint supplement by Estates Gazette and Caterer & Hotelkeeper magazine