Prime Central London is on the verge of losing some of its best-loved historic restaurants, with nine in 10 restaurateurs gearing up to adapt or die if rents and rates continue as forecast, a new report claims.
A huge 87% of restaurateurs said they would no longer be able to continue their business in their current form if rates and rents continue to rise as forecast, according to a poll from Cedar Dean Group. Of those 87%, four in ten anticipate shutting up shop entirely, while 57% say they will be forced to relocate to a cheaper area. Just 3% said they thought they could adapt their business model.
The research comes as London’s restaurateurs face up to the most challenging business environment in recent history.
Prime Central London has seen colossal rent rises over the last few years, far outpacing those seen in the rest of the capital.
Rents in the W1 and WC2 postcodes have more than doubled in the past year. Rents in Mayfair have risen by around 400% over the same period, from £150 Zone A per square foot to £600 per square foot today. By comparison, on average London restaurants coming up to their five-year rent review face an increase in rent of 50%.
As a result, Prime Central restaurateurs are being forced to spend a higher proportion of their turnover on rent – currently equivalent to an average of 16% of turnover, up from 10% in 2006, and 13% in 2011.
If the rate of growth does not slow, Cedar Dean Group forecasts that operators will be paying an average of 20% of turnover in rent by 2021.
Worryingly, more than a third (36%) of London’s restaurateurs say they are paying 20% or more of turnover in rent already, despite the rule of thumb that restaurateurs can afford to pay, at the very maximum, 15% of their turnover on rent.
David Abramson, CEO of Cedar Dean Group, warns that some of London’s top restaurants face the very prospect of relocation or closure. “Rising rents have outpaced inflation and far surpassed growth in the rest of the capital, ” he said. “Looming business rate reviews are adding further to the cost pile. And whilst the new breed of ‘supertraders’ like Five Guys and Shake Shack are adding much colour to the market they are having a negative impact on the incumbents and pricing them out of the market. We have reached a tipping point where this crucial layer of London’s identity could be about to peel away.
Abrahmson said that restaurateurs need to be more innovative than ever before to make their increasingly expensive central locations work hard for their money. Having the confidence to adopt all-day dining models to boost the covers a restaurant can process, was one example of this, he said.