Opportunities through disruption in the pub and restaurant market

02 March 2021

The pubs and restaurants market has faced one of the most disruptive periods in recent times. With the reopening of the sector unlikely until at least April, many operators will have only operated for four out of the past 12 months, Stuart Stares at Associate Director, Licensed Leisure Savills has written.

While distress in the pub sector has been reduced with lenders continuing to support operators, the restaurant sector has faced a far greater fall out with a number of operators completing CVAs and administrations such as PizzaExpress and the Casual Dining Group.

While some of the larger restaurant chains have focused on rationalising their portfolios this has created opportunity for independent operators and investors. Others have sought to be more innovative to increase and add value to their assets.

Within the pubs and restaurant market it has often been difficult for independent or smaller operators to compete with the expansion and appetite of the larger chains, especially for the best sites. We are now seeing independent operators actively acquiring sites that rarely become available, are fully fitted and in many instances fall outside of the requirements for corporate operators.

These operators have proven to be more nimble and fast moving in adapting for change and we’ve seen operators successfully implement takeaway services during the first lockdown and then introduce/partner with food vans where pubs did not serve food to allow them to remain open.

They’ve also used the time where they had been closed to update and redecorate interiors, adopt technology to allow for ordering through apps and update and utilise outdoor space for more efficient use. This has all meant that independents had welcomed back customers in large numbers and remained popular until the latest lockdown.

However, the independent operators are not the only ones that have been interested in the sector. These sites have also attracted the attention of investors who are looking to repurpose them for alternative uses. These investors are hunting for large sites with unused excess land and sites that could be changed in its entirety.

We’ve seen a number of pubs and restaurants snapped up for ‘Covid-proof’ operators such as drive-thrus, convenience stores, care/retirement home and day nurseries. A good example is the former Chiquito in Shrewsbury, which offered great connectivity and space, that has been repurposed into a day nursery and is due to open later this year.

Additionally, while traditional high street lenders may have restricted their lending there remains a number of active lenders in the sector, which has not only supported investment into it but given tenants the opportunity to acquire their freeholds. With record low interest rates tenants are seeing mortgage payments below previous rents and therefore there are savings to made.

The demand from alternative uses and from independent operators has supported the pricing in the sector, and as we see light at the end of the tunnel and an expected bumper summer, we anticipate healthy demand for pub and restaurant sites going forward.