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Is it time to forget the cosy London boozer — gleaming brass, upholstery and sparkling optics?
According to research published Monday, rapidly rising rents will force London pubs to reinvent themselves.
London pub rents have increased by as much as 22% in the last five years, compared to single-figure increases outside of the capital, according to new data from specialist consultancy Fleurets.
The average increase was £22,788. The average London pub rent is now £141,661.
Fleurets director and head of professional services David Sutcliffe predicts that under pressure from rising rents and a troubled economic outlook some operators will pull out, whilst others will rethink and inject more “competitive socialising” into their venues.
Competitive socialising — whether it is pool, darts, crazy golf or Canadian axe throwing — can boost pub revenues by between 25% and 50%, offering a lifeline to licensees facing rent hikes.
The data reinforces a long-term trend toward pub closures and conversions, as social trends change. The number of pubs and bars in Greater London fell by 25% between 2001 and 2016, down to 3,615 from 4,835.
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Sutcliffe confirmed analysis by The Economist that suggested pressure for residential conversion of pub premises was overstated.
“Residual residential values of the site have a slight effect, but that is offset by the higher rents now being achieved from operators," he said.
"The closure of pubs means that those that survive are in better locations with better quality operators. The flip side of closures is more investment in better premises, and poor licensees out of the market, which is helping to drive rents.”
But can pub takings grow at the same pace as pub rents?
“That’s where the problems might come,” Sutcliffe said. “There’s also rising rates bills, rising overheads from the labour market, rising input costs due to exchange rates, and rising utility costs — so London pubs have got a headwind coming. For some of them this could be a tipping point.”
Sutcliffe said the rate of rental growth will slow but that rents, which would normally be 50% of residual profit, rising to 60% to 70% in extreme cases, can only grow so far before pub operators take fright.
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