The restaurant sector in the UK is poised to see a flurry of transactional activity in 2021, with almost equal appetite for deals to be done among those who are either looking to buy or sell.
That’s according to specialist business property adviser, Christie & Co, which has just launched its annual Business Outlook report covering the restaurant market.
In this year’s report, Christie & Co surveyed a pool of restaurant operators to gain an understanding of sentiment within the market, and the outlook for business operations in 2021.
Some 40% of respondents reported that they are planning on selling their restaurant businesses this year, along with 39% that noted they are interested in expanding their portfolio.
Prior to the pandemic, the restaurant sector was already experiencing a period of decline, driven largely by an over-saturated market, and the events of the past 12 months have only served to accelerate that trend.
Despite a period of uncertainty as the UK entered lockdown in March 2020 with the sector brought to a halt, Christie & Co observed an uptick in market activity from 1 April, suggesting investors are still keen to invest in the sector. 60% of its team’s restaurant transactions completed between April and December.
Christie & Co’s restaurant price index for 2020 reports a 18% decrease in average prices, which follows a period of decline since 2017.These challenging trading conditions were exacerbated in 2020 as a result of Covid-19. As such, 59% of sentiment survey respondents expect further pricing deductions into 2021.
An overwhelming 85% of respondents unsurprisingly said the pandemic has had a negative impact on their business, with the majority (59%) predicting it could take one to three years for the sector to return to pre-Covid levels.
Stephen Owens, managing director of pubs and restaurants at Christie & Co, said: “Prior to the pandemic we already saw that the restaurant sector was suffering from the affects of ill-advised over expansion.
“Many restaurants turned to takeaway and delivery platforms to help them trade through the impact of restrictions, which has also helped maintain their connection with customers. The rebalancing of prices and rents in 2021 and beyond will lead to a more sustainable sector, with buyers eyeing suitable opportunities”.
Christie & Co’s top 4 predictions for 2021
1. Growth in the food delivery and takeaway market will be sustained as convenience remains key, with many independents continuing to adopt this as part of their strategy.
2. The uptake of touch-free, digital and app-focused ordering systems by both consumers and operators will increase, should operating restrictions and social distancing requirements remain.
3. Casual dining operators will continue to struggle, especially those in city centre locations, with further casualties expected from Q2 onwards as government support begins to end. However, drops in value of large, PE-backed restaurant groups will stabilise in 2021.
4. Demand from independent operators and community-based operations will continue, driven by the trend of localisation and falling rents, creating greater opportunity for those looking to expand.