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Rental Survey 2013


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2013 marks the 28th year that Fleurets has produced an annual Rental Survey.
Continuing the theme from last year's survey, we again propose to provide a more general ackground commentary on the Rental Market, giving a commentary on the wider leisure sectors rather than the Free of Tie and High Street rents that we historically focused upon. The information contained in this report is based upon the work undertaken by Fleurets
over the past 18 months.


The uncertainties that have dominated both the Global and UK economies continue to dominate both the wider property market and more specifically the leisure market. With rents ultimately being determined by the ability to pay, these uncertainties have inevitably affected rental levels.
Recent evidence suggests we did not enter a double-dip recession and there maybe a return to growth. However, the general economic outlook still remains unclear. Whilst there are positive signs of improvement there is still some uncertainty, particularly given the continuing austerity measures. Therefore whilst we anticipate some movement it is likely that any
significant levels of growth within the economy remain some years ahead.

Tied Pubs

Most pub operating companies now have a Code of Practice in place. These codes set out a
framework as to how rental negotiations should be conducted providing an obligation on the landlord to action in a fair and reasonable manner. Historically rents could only be reviewed upwards. The new Codes now provide an opportunity to settle rents below the passing rent, where the market rent has fallen below the current contracted rent. Over the past 2 years we have also seen the major pub companies, such as Punch and Enterprise expanding their in-
teams to ensure that the Codes of Practice requirements are complied with.

As part of the Code of Practice procedures the pub companies have entered into an alternative
low cost resolution service called the Pub Independent Rent Review System (PIRRS). This allows tenants a low cost basis of resolution should a negotiated settlement not be forthcoming. This is in contrast to the more expensive Independent Expert/Arbitration route; though this route is still open to tenants if they so desire. It is interesting to note that the PIRRS scheme has had a relatively low number of referrals with only a handful ending up with a determination. As with the Arbitration and Independent Expert procedures we are seeing
parties use these services as a negotiation tactic rather than being fully committed to progress cases and incur these additional costs.

As previously stated with the new Codes rents can go down as well as up. This has resulted in a number of rental determinations below passing rent. Ultimately it is far better for a landlord to have a tenant in a property paying the correct rent rather than having an over-rented tenant struggling to meet his obligations. In addition, there is an increase in tenant support, with
increased wholesale discounts being passed on to tenants. We anticipate this continuing for the foreseeable future.

Interestingly we are seeing a number of changes to tied lease agreements. Historically, when there was a buoyant leasehold assignment market there was generally a greater desire to take on longer leases also on full repairing terms. More recently we have seen a trend where traditional 3 year tenancies have become more desirable. These tenancies are generally on
internal repairing terms and quite often have a full tie.

It is now 20 years since the first commercial Full Repairing and Insuring leases were introduced and we are starting to see a number of the original leases come to termination. Where there is no agreement, as with other commercial leases, these disputes are referred to County Court for
resolution. This can prove a particularly costly process given the legal requirements.

The cheaper PIRRS scheme can be used for lease renewals as well as rent reviews. There is also the option of determining rents via an arbitrator or an independent expert instead of the uncertainty of having a judge to decide the rent. This is known as PACT (Professional Arbitration on Court Terms). Fleurets often deal with rental determinations under both schemes.

Free of Tie Leases

Operators on free of tie leases are no different from other tenants and are being impacted by the wider economic uncertainties and increasing overhead costs. As tied leases have generally received poor press in recent years there is an increasing appeal to some tenants who prefer free of tie agreements. Under normal circumstances we would expect free of tie rents to be higher than the equivalent tied lease given that the tenant has the ability to purchase products direct from their own suppliers and thus negotiate bigger discounts than would normally be available under the tied lease arrangement.

However, when the pub becomes vacant landlords often have no proof of what turnover and profits the business previously enjoyed (unlike a tied lease where the barrelage provides basic guidance). It is therefore often difficult for landlords to re-let premises at rents as high as they
previously were. We see an increasing trend with free house owners, who unable to secure the desired price in today's market by way of outright sale, are instead leasing pubs free of tie. We generally recommend that lessees are obliged to lodge copies of quarterly VAT returns and annual accounts. This ensures the landlord has a correct understanding over the level of
trade and that the rents can be correctly assessed.

One word of caution is that one aspect of a free of tie lease is that the rent is contractual and does not allow for falls in wet volumes. Where a tenant pays part of his outgoings as 'wet rent' i.e. beer purchases from the landlord, there is a safety valve. If beer volumes decline then the 'wet rent' would also decrease.

In addition most free of tie landlords are not bound by the industry's Code of Practice. Therefore unlike tied lease estates there are no provisions for rents to come down.

High Street Bars

Historically this has been one of the surveying industry's key areas for rent review work. This sector evolved during the late 1990s with many operators taking former retail units within town centres. At that time many units were taken, which in the current day would not meet with operator requirements, either in terms of size or location. We have seen the evolution of dedicated circuits within towns. In fact some cities operate with 4 or 5 distinct circuits within their own centre. These circuits can have their own particular characteristics, be they high class bars, young persons venues or mixed leisure developments.

We have witnessed many reviews being settled at nil increases. Without exception rent review provisions are upward only and with falling market rents the contracted rent continues to be paid. As a consequence we are seeing a number of pub companies seeking to re-structure
leases with their landlords. In many cases this is a last ditch attempt to obtain an affordable rent; otherwise the tenant may enter into a form of pre-pack administration.

It continues to hold that it is far better for a landlord and an operator tenant (in any sector) to be paying the correct rent rather than struggling within an over-rented unit. An over-rented unit usually results in a lack of investment resulting in a spiralling decline in turnover and rofitability, thus rental value.

What is also interesting is that where these units have failed, we are now seeing restaurateurs and retail operators re-take the space. In addition some of the failed units have been re-occupied by other pub companies, though at significantly lower rents than previously being paid and in many circumstances for an already fitted-out bar.


The uncertainty within the Nightclub sector continues. This has not been helped by the recent failure of Atmosphere Bars. All the pressures that we have previously reported on continue to be a factor in the current year. These issues being youth unemployment, high student debt, competition from late night bars and front loading by the core customer age range. In recent weeks the late night levy has been debated by a number of local authorities. Whilst a number have dismissed the idea, Newcastle City Council decided that they will work up proposals for a late night levy. This can only have a negative impact upon profitability and ultimately rental
values of the late night sector.

For the larger standalone nightclubs rents will generally be lower per sq ft. than for smaller units that compete directly with the late night bars. We anticipate that rental levels will remain competitive for the nightclub sector with limited opportunity for growth other than those that may operate in prime locations.

It has generally been the South of the country that has seen the greatest level of activity, though Fleurets has received a significant increase in instructions throughout the country. There appears to be continued investment and positive economic activity within the M25. London has over the past 12 months been the focus of worldwide attention with the Olympics, Jubilee and Royal Wedding. Elsewhere these trends are slowly starting to filter out to the regions, and suggest that we may have turned a corner from the problems of the last five years.


Restaurants continue to buck the trend. There has been positive activity within this sector as key operators continue to expand their portfolios. All the fast food operators are continuing to seek new sites and are generally paying competitive rents. In addition, the pub companies have
continued to expand their managed house operations and are starting to compete for locations previously taken by the fast food operators i.e. on retail parks. We are seeing such developments as Harvester being operated from modern shell premises, which could alternatively be used for retail space.

The disposal programmes for the restaurateurs for failing units also continues, though at lower volumes than in previous years. In many cases these units have been disposed of with the assistance of reverse premiums or sub-lets below passing rent. We expect this sector to continue to evolve over the next few years, particularly as dining out continues to be a feature
of the UK leisure market.

Leases often allow for use by A3 (restaurants) or A4 (pubs). Care has to be taken not to assume that just because a property could be used for both purposes bids would actually be made by both sectors. Restaurateurs generally occupy smaller premises than pub operators. Restaurateurs steer clear of the rowdy pub circuits. Conversely pub operators do not want the
more up market locations that perhaps have a lower footfall whereas they are ideal locations for restaurants.

Regional Review

It is evident from the following figures that a large proportion of reviews (particularly those with upward only review clauses) are being agreed at zero uplift, suggesting market rents are below the contracted rent. However it should be noted that despite the market conditions a third of all
reviews resulted in rental increases. Fleurets have dealt with a large number of reviews over the past twelve months, up 37% on the previous year, which perhaps reflects that we are
at long last beginning to see an upturn in the market or at least the end of the downturn.

Regional highlights for all rent reviews, acting for both landlords and tenants, which have been undertaken by Fleurets over this period are shown below:


  • Highest number of reviews
  • Overall average 8% increase
  • 9% with rent reduction
  • 29% no change
  • 62% with rent increases
  • 25% of increases less than 10%
  • 19% of increases between 10 - 20%
  • 18% of increases above 20%

South and West

  • Overall average 4% increase
  • 13% decrease
  • 46% no change
  • 41% with rent increase
  • 19% of increases less than 10%
  • 14% of increases between 10 - 20%
  • 8% of increases greater than 20%


  • Overall average 1% reduction
  • 22% with rent reduction
  • 39% no change
  • 39% with an increase
  • 13% of increases above 20%


  • Lower number of reviews overall
  • Overall average 3% increase
  • 4% with rent decrease
  • 62% no change
  • 34% with rent increases
  • 8% of increases above 20%


We anticipate there being increased activity over the next 12 months. Institutional Landlord's will be looking for growth given the lack of movement in rents over the past 5 years. In addition we expect that the Pubcos will continue to work within the new Code of Practice guidelines.
This is likely to result in rents throughout the country being agreed at affordable levels.

As with any survey it is the understanding of the core data and the understanding of the individual circumstances surrounding any deal that is paramount. It is therefore essential that landlords and tenants alike should obtain sound professional advice. Fleurets are able to provide this advice having a team of experienced Chartered Surveyors who have specialised in
rent reviews on licensed and leisure property for many years.

Click here to open the pdf directly.