Battle for Space hits London’s Restaurant Sector

Posted on 13 February, 2015 by Kirsten Kennedy

The huge demand for commercial property is extremely good news for London’s market, yet often the squeeze for space is coming at the expense of smaller independent retailers and leisure operators. This has been the case in the city’s restaurant sector, where small family-owned establishments are struggling to find space as international chains snap up stock in prime locations.

Battle-for-Space-hits-Londons-Restaurant-Sector

According to Peter Thomas, director of Central London retail at property agent Savills, the West End is seeing the biggest battle for space, often sparking bidding wars among 50 or more restaurant operators. Even smaller units of 2,000 sq ft are seeing an elevated level of interest, with an average of between 15 or 20 bidders pushing small to medium sized restaurant start-ups out of the market.

Even restauranteurs with a proven reputation in the city are struggling to source expansion space for their business, as was discovered by owner of the Café Caldesi in Marylebone, Giancarlo Caldesi. Despite participating in a number of discussions with potential future landlords, he has so far failed to secure a lease agreement due to larger chains with more financial backing swooping in before he can sign on the dotted line.

He says; “I can’t compete with the big operators. I’ve tried for five places but when a landlord is offered £50,000 more by a chain they can’t say no.

“If I can’t expand my business I will have no choice but to sell – I probably should have sold up already but I’m too stubborn.”

Mr Thomas points out that, in the past three years alone, commercial rents in key London areas have doubled and those seeking to expand their businesses have seen demand “rapidly outstrip supply.”

While the obvious choice for new start-ups would be to seek smaller units in areas with less demand, the fact that housing has become so expensive in the capital has greatly diminished evening footfall in areas which would previously have been viable – a recent study by the Empty Homes Agency, for example, showed that the number of empty properties in well-located Kensington and Chelsea increased by 40 per cent year on year last year.

Yet the key issue, according to commercial agent Devono, is the high level of demand from international brands, which has doubled in the past year alone. This has escalated to the stage where even hugely successful multi-nationals are waiting for up to a year to secure a prime site.

The question, then, is what small start-ups can do to get their feet on the ladder and successfully acquire the premises desperately required for their business?

Director of retail and leisure at Devono, Philip Sandzer, advises; “When you deal with landlords, don’t say burger joint or chip shop as they will run a mile – concentrate on touchy-feely words like ‘fusion’.

“Landlords want entrepreneurial and innovative businesses; they don’t actually want the multiples.

“But they will always err on the side of caution so, as a start-up, it is important to sell the strength of your concept above your financial security.”




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