Published 6 April 2021
by Camilla Topham
Co-founder of Distrkt Camilla Topham questions whether the hospitality industry can come out of the crisis unscathed or whether there will be a day of reckoning.
With lockdown easing, the sun shining and the success to date of the UK vaccine programme, there is certainly optimism in the air for the hospitality sector. This has been reflected by the huge increase in market activity we are currently seeing, with many agents reporting a significant increase in viewings, offers and the deals that are starting to come through. Operators that are in the market are anticipating reaping the rewards of the pent up demand and seeking opportunities to increase their market share. They recognise the market is smaller, competition diminished, and the opportunity to get prime sites is greater.
Those in the market are the operators without the legacy of over-expansion and unviable sites, whom have pivoted their offering in the lockdown world and are planning to emerge from this crisis stronger than ever. These fledging, innovative hospitality groups will undoubtedly drive the recovery in the sector going forward.
With all of this optimism around, it could be easy to forget about the impact of CV-19 on the sector and the £53bn lost to hospitality in 2020 (without even calculating this years losses). Is it possible that the hospitality sector can come out of this crisis unscathed? Whilst it may seem so at the moment, it is unlikely these market conditions will be sustained and what we are witnessing at present is the calm before storm. Spring is in the air for the industry and a full re-opening is on the horizon over coming weeks, but it cannot be forgotten that the sector has accumulated a mountain of rent debt which has not been addressed.
With the Government failing to address rent debt and instead prolonging a commercial lease moratorium, they have created a false economy which once expired, will give the industry its day of reckoning. Whilst many forward-looking Landlords have supported tenants in a quest to keep doors open, there is a huge number who have not. After a year of barely trading, many operators do not have the funds to pay these debts or even the working capital required to re-open. When the lease moratorium expires, we will unfortunately see an uptick in insolvency activity. Some are predicting that as many as 30% of hospitality venues will not open at all post lockdown.
This will result in more stock on the market and whilst demand is improving, it is still tempered versus pre-Covid levels. With the supply demand dynamic changing, rents and lease terms such as upward only rent reviews will come under pressure as a new more partnership-based leasing model emerges.
Whilst the day of reckoning is somewhat inevitable, it cannot be forgotten that as challenging as the past year has been, it has sparked huge innovation and creativity in our beloved sector. Whilst furloughed from the floor, operators have been creating new concepts and developing ideas. Experience and true hospitality are going to be absolutely key going forward in a survival of the fittest landscape.
Camilla Topham is Co-Founder of Distrkt and Residency (thisisresidency.co.uk) with extensive experience in F&B and leisure leasing in leading London developments and estates and nationwide. ([email protected])
Distrkt is a modern property consultancy that is predominantly Landlord focused and specialises in the restaurant and leisure sectors delivering an innovative company culture that reflects the dynamic sector in which it operates. (distrkt.uk)
Distrkt+ is an extension to Distrkt and offers an in-depth restaurant consultancy service to Landlords assisting them to work closer with their F&B tenants by gaining understanding and insight to their businesses and offering solutions for greater success.
Residency is a pop up initiative pair vacant restaurant venues with emerging chefs, restaurateurs and food and drink concepts offering support throughout the process for Landlord and operator. The key to unlocking vacant property (thisisresidency.co.uk)