Landlords could start forcing rent reviews on pubs, bars, restaurants and nighclubs, as they attempt to squeeze out a return on their investments.
That's the warning from the latest Fleurets Rental Survey. David Sutcliffe, director at the company, said: "We expect rent review activity to be relatively subdued for the immediate future. However, landlords who have bought investments will not wish to see rents continuing to remain static and may start forcing rent reviews, which could result in some further increases."
However he also indicated that how rental levels move over the longer term would be dependent on the general economic circumstances.
Where rents on fitted out pubs (be it on a free of tie or tied basis), continue to be valued having regard to trading potential, market rents should continue to be maintained at sustainable levels, particularly where there is an opportunity to reduce the rent should circumstances dictate. In fact if all sectors considered a profits approach to valuations there is more likelihood of affordable rents being charged throughout all sectors," he said.
Traditional pubs, either tied or free of tie, are still valued by reference to turnover, profit and the tenant's ability to pay. In many cases turnover has grown over the past five years, not least because of above inflation increases in government duty on alcohol, but profits have fallen.
Regional highlights for rent reviews undertaken by Fleurets included:
• Highest number of reviews
• 35% no change
• 11% with rent reduction
• Average reduction 17%
• 54% with rent increase
• 26% had increases of less than 10%
• 27% had increase of more than 20%
South and West
• 19% with rent reduction
• Average reduction 28.6%
• 50% no change
• 31% with increase
• Average increase 21%
• 27% of rents with no increase
• 18% with rent reduction
• Average reduction 36%
• 36% with rent increase
• Average increase 16.5%
• 50% of rents with an increase
• 50% with no change
• Average increase 17%
By Neil Gerrard
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