Restaurant operators lose their appetite for high street sites

16 January 2013 by
Restaurant operators lose their appetite for high street sites

Restaurant operators are losing their appetite for high street sites because of the number of failures among retailers, including recent high profile casualties like HMV, Jessops and Comet.

That's one of the findings from leisure property experts Christie + Co, which yesterday launched its Business Outlook 2013.

Christie + Co found that business property prices dropped by an average of 2.48% in 2012 - the fourth time they have fallen in the last five years.
Restaurant prices dropped 1.4% in a "stifled" market, although Christie + Co's director and head of restaurants Simon Chaplin said that the quick service sector which features brands including McDonald's, KFC and Domino's Pizza continued to grow.

Looking ahead to 2013, Chaplin said: "Dining outside the home is no longer prompted by special occasions, or the need to socialise - it is drive by our hectic lifestyles.

"Eating out is firmly ingrained in consumer behaviour and we are confident that the value of the restaurant market will continue to grow during 2013."

But it is new sites linked to shopping centres, particularly if there is a cinema attached, that restaurant operators are most interested in, rather than high street areas. Chaplin said that while the restaurant property market in London and the South East was still seeing movement, it was much more restricted in other areas of the country, with several big restaurant groups finding that they had provincial high street locations that were struggling.

The UK hotel sector needs to prepare itself for further challenges in 2013, Christie + Co warned, although it said there were indications the property market was reaching "the bottom of the value curve".


Hotel prices fell 3.1% on average. Christie + Co said the market kept moving simply because some owners had a genuine need to sell and were willing to accept realistic prices.

"Most hotel owners and operators have progressed from denial to acceptance and now, five years after the downturn started, many are actively preparing for recovery," Jeremy Hill, director and head of hotels at Christie + Co said.

"Owners, operators and investors have all become much more sensible and realistic, believing that trading conditions have stabilised and accepting that values are unlikely to move much lower."

"Although the banks still have large exposure to hotel debt, the appetite of some is gradually returning and they are lending selectively to operators who demonstrate a track record of success."

Meanwhile, the average pub price fell by 3.3% in 2012. Christie + Co said experienced pub operators seemed more confident about the prospects of the pub sector, following some steep falls in property prices over recent years, particularly in 2008 and 2009.

As a result, 77% of pubs sold in 2012 were sold to experienced operators. Meanwhile 62% stayed as pubs, with less than 6% of pubs sold for convenience store use. Pub sales were also up nearly 10% in the year for Christie + Co.

Director and head of pubs Neil Morgan said: "Pubs have never been more affordably priced, and with banks and major pubcos busily shedding assets, there were plenty of appealing opportunities for experienced operators in 2012. Although many of the assets were sold from the bottom end of estates, some were of very high quality.

"Managed houses continued to be the most highly prized pub assets and, with around nine thousand units in the UK, competition for the few that reached market was particularly intense."

"As pub companies continue to widen their appeal, improve their trading performance and boost investor performance, we expect the transaction market to become a little more dynamic in 2013. The banks and big companies will continue churning their estates and disposing of assets - generating opportunities for the smaller, up-and-coming operators to expand."

Christie Finance releases £20m tranche of financing for pub and hotel investments >>

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