It might feel like an unprecedented amount of restaurants have closed their doors since the turn of the year – but the market is merely encountering a “period of adjustment” following a prolonged phase of growth, it has been claimed.
According to peer-to-peer secured lending specialist Lendy, the number of restaurants in England has increased by 13% since the recession, which in unit terms is the equivalent of more than 25,000.
And it insists the sharp rise highlights just how intense competition in the UK restaurant market has become, as recent years have seen rapid nationwide expansion by high street brands and an explosion of new entrants.
Liam Brooke, co-founder of Lendy, said that market saturation is a “key reason” why many leading chains as well as independents are struggling, citing Byron, Jamie’s Italian, Prezzo, Strada, Carluccio’s and EAT as high-profile examples of chains that faced tough times this year.
With many operators seeking to renegotiate rents or close restaurants altogether in order to reduce costs, commercial property investors are being warned that the challenges facing the casual dining sector reinforce the need to build a diverse portfolio of assets in a range of locations.
“In the last few years, appetite for new restaurant openings has seemed insatiable. Now we are seeing a period of adjustment where many well-known brands are restructuring their businesses and re-evaluating their strategies and many independents are struggling to compete,” said Mr Brooke.
“For property investors it’s a timely reminder not to put all your eggs in one basket, but to look for opportunities to create a diverse spread of investments across a range of commercial properties, with loans at sensible borrowing multiples. This approach can help investors take advantage of high growth sectors, while limiting their exposure to any market downturn in particular industries or locations.”