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Rental Survey 2011


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This is the 26th year that Fleurets has produced its Annual Rental Survey. As with last year's revised format we have continued to focus on the A4 high street bars and traditional pubs let on Free of Tie agreements. Whilst records go back over the past 30 years, we have concentrated our findings to the last 20 years.

In considering these statistics it is important to understand the wider economic conditions
and its impact upon the leisure and property industries. During the time that Fleurets
has produced the rental survey, we have experienced three official recessions. However,
the current prolonged economic difficulties are arguably the worst we have witnessed during
this period. What started in late 2007 is still with us 4 years later and still having an impact on rental values. Given the current Government spending cuts, rising taxes and persistent inflation, it is difficult to predict when we might start to see an uplift commencing.

We continue to work in an environment that remains relatively quiet. Many of the major
companies are focusing on rationalising their estates. We have witnessed most of the pub
companies disposing of their bottom end properties. In addition, high street bar operators are consolidating or acquiring already fitted out units, rather than acquiring new shell premises. With the limited amount of letting activity there is an obvious lack of fresh evidence being produced. There has also been a relatively low number of rent reviews being actioned and
for those that have, many remain outstanding. In addition, we are also seeing some of the larger corporate operators, particularly J D Wetherspoon, restructuring their leases to replace rent reviews with fixed uplifts.

Most rent reviews currently being settled are ones that have been outstanding for a number of years; in some case even longer. Many reviews remain outstanding or un-actioned because
either the landlords have not considered there to be rental growth or parties are continuing to negotiate hard for their respective clients. The disparity between landlord's aspirations and tenant's ability to pay remains a continuing theme. There are however, inevitable hotspots where rental growth has been witnessed, particularly in the London areas.

There has been limited rental growth within the Free of Tie Traditional Pubs, although we are starting to see a small increase in the number of properties being made available on these agreements. It is likely that we will see the impact of these lettings come through in future
years. There has been evidence of new lettings, which may demonstrate a willingness for people to still take leases, as they remain a low cost entry into the pub industry. Fleurets has been working with Criterion Asset Management and successfully secured tenants for a number of their Free of Tie pubs.

With upward only rent reviews (a common feature of commercial leases), it is difficult to prove the true rental value of a property, as in many circumstances the market rent is below
the passing contracted rent. It is inevitable in these circumstances that landlords will be
reluctant to action rent reviews. Over the next few years we are likely to see some of the
high street bars coming to the end of their initial 20/25 year term. It will be interesting to
see how the rents change at lease renewal where parties have the ability to renegotiate
rents either upward or downward.

We continue to believe that rent review activity will remain relatively quiet for the foreseeable future. We are starting to see some positive results coming out of the managed house
operators with J D Wetherspoon, Mitchells & Butlers and Inventive Leisure posting positive
results. Once this filters through into the property market we may start seeing an uplift in rental values, though this may be some time away.

We have also witnessed a continued desire from investors to secure high street investments. Recently, Stonegate has been formed out the merger of Town & City and a group of ex Mitchells & Butlers wet led pubs, with TDR Capital providing the private equity. Fleurets has also received strong interest in the disposals of a portfolio of investments let to Slug & Lettuce

A number of companies have continued to expand, including Inventive Leisure with their Revolution and newer Revolucion de Cuba brands, as well as smaller operators such as
Loungers, Anglian Country Inns and new entrants No Saints. Peach Pub Company and
Orchid also continue to expand by taking leases.

As with any statistics it is the understanding of the core data behind these headline figures that is important. Statistics are no substitute for sound knowledge and experience. Fleurets has this detailed local knowledge and our regional offices will be pleased to assist in providing a more detailed explanation of this survey.

Click here to open the pdf directly.