Lewis Craig Blog

OPINION: MARKET INDIGESTION – TIME FOR A REMEDY?

In February’s issue of Casual Dining Magazine, Lewis Craig director Theo Benedyk looks at the wide variety of new and diverse cuisines, and how the increasing number of restaurants is impacting on the sustainability of the food and beverage industry.

Please click HERE for a link to the article.

A wide variety of new, exciting and diverse cuisines continue to land on our plates. We discuss how the increase in number of restaurants is impacting on the sustainability of the F&B industry.

Recent market research has shown that 40% of UK diners “prefer tried & tested cuisines”, with 31% who “love to try new cuisines”. Only 12% “enjoy fine dining” and 18% “like to eat healthily”. It is no surprise therefore that we have seen a significant rise in operators from street food pop-ups, through casual dining to fine dining restaurants.

The UK food arena continues to benefit from an ever increasing amount of cool and quirky food operators as well as an expansion of established brands. Many start in the trendier London locations,  offering an excellent variety of quality cuisine from across the globe, with a handful of examples being the likes of Peruvian operator “Ceviche”, Scandinavian venue “The Harcourt”, Korean operator “Koba” and “Bala Baya” offering a modern Israeli experience.

Operators are quick to see the benefits of expanding beyond the M25, with an increase in demand for opportunities in all major UK cities. New developments such as the recently opened Westquay Watermark scheme in Southampton have seen some exciting names sign up, with Red Dog Saloon for example making their debut outside of London. Other interesting cuisines joining the mix include Buenos Aires inspired operator “CAU”, Brazilian eatery “Cabana”, and Pho with their Vietnamese street food offer.

Delivering a reliable product, excellent service, and a memorable atmosphere are vital, however the key question is, can an over-demand for restaurant opportunities, whether from national brands or independents always be a good thing?

Certainly the general public may be loving the new additions to their landscape, but the story from the operator side is not always so rosy, with a combination of external pressures now building up including greater sector competition, substantial increases in business rates in many locations (from April 2017) along with an increase in minimum wage, a weaker sterling and general economic uncertainty, all combining to challenge operator’s margins.

With an insatiable appetite from an ever-increasing food savvy customer, new restaurant concepts are in hot demand for available property opportunities. It is a typical case of under-supply of A3 sites, and over-demand from new and existing operators, causing many to pay more than they can sustainably justify for a premium or rental level in order to simply secure the right site. Landlords are then able to use this “inflated evidence” in rent reviews, in turn making it tougher for operators to trade profitably.

We are of the view that 2017 will start to see some much needed economic realism return to the market. Once the impact of the April business rates increase kicks in, amongst many other factors as mentioned above, we will inevitably start to see a softening in premium and rental figures being offered.

There is absolutely no doubt that the public will continue to enjoy eating out and exploring the ever-growing selection of cuisines and concepts. This effectively means that the underlying demand for premises is set to remain strong, from artisan independents, growing small chains and the nation’s favourite brands. Ultimately though sustainability and survival will depend on occupiers taking a more cautious approach!

Theo Benedyk is a Director at Central London based Retail & Leisure property agency Lewis Craig. To discuss any and all things relating to food and property, get in touch with him on 020 7009 0480, or tb@lewiscraig.co.uk

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