While UK pub rents continue to soar, London 'superpubs' are seeing a slow down. Michelle Perrett reports.Pub rents across England have soared by 25 per cent over the last five years, according to the annual rental survey from property agent Fleurets. But the tough climate on the high street and the fact that there are too many operations competing for business has meant that rents of superpubs in London - high street sites of between 5,000 to 10,000sq ft - rose by only 19 per cent in the five years to 2002, a dramatic fall compared to the 40 per cent rise in the five years to 2001. Barry Gillham, chairman of Fleurets, said: "There are too many superpubs in London chasing too little business. Operators have been tempted to pay too much money chasing a pot of gold to expand in London."While the high street has been hit in London, the prices of pubs are still rising, although at different rates. To rent a traditional free-of-tie pub in London a licensee can expect to pay £70,225 annually - a rise of five per cent over the last 12 months and 23 per cent over the last five years. Surprisingly, rents of traditional pubs in London's City have increased by only 18 per cent since 1997 to £68,199. This lower than average increase is likely because of the growth in the late-night drinking market, which has led to a boom in superpubs in the area. The result has been a drop in trade and a dent in the turnover for the traditional pub, which has inevitably made them less attractive properties, says the agent. It will come as no surprise that the highest rents in the capital are paid in the bustling West End where high street leases have spiralled by 29 per cent to £171,344. Traditional pubs in the area have an average rent of £81,209, considerably lower than the high street but still up 21 per cent. As London operators are paying the highest percentage of turnover in rent - 15.55 per cent of turnover while outside London it is only 9.85 per cent. London has been particularly badly hit by the tough trading conditions on the high street. The result is that the number of new lettings has tailed off. While it peaked at 49 in 1997, last year Fleurets handled only three new lettings, although the number of rent reviews is gathering pace with the company conducting 17 rent reviews in London in 2002 compared to none in 1995. The survey reveals that outside the capital, the South East is the most expensive place to rent a traditional pub, with a licensee paying an average rent of £46,381. The South West has seen the largest increase in rents of these pubs over the past five years at 37 per cent. The most expensive place to rent a high street pub outside London is in the Midlands - a licensee or pub company can expect to pay an average rent of £109,397. Mr Gillham said: "A large amount of this increase in the Midlands is Birmingham. Broad Street and Canal Street have had the greatest expansion of licences than any other city."While London rents are still increasing, the provinces - apart from the Midlands - have been relatively consistent, especially for high street sites, which are averaging between £93,000 to £99,000. Licensees on the high street in the North of England have the lowest average rent in the country at £93,000 but as a region it has witnessed the largest increase over the past five years. Rents have spiralled by 32 per cent over the last five year but between 2001/2002 rose by four per cent compared to two per cent for the rest of the provinces. Predictions for 2003Barry Gillham (pictured), chairman of Fleurets, predicts that 2003 will see rents start to fall as the failure of many of the high street operators starts to impact the industry. He said: "These statistics don't show the current drop in the market. 2003 is going to show substantial drops following the carnage on the high street since last September. "The failure of companies such as Old Monk, Brannigans and Po Na Na will be used by tenants in rent reviews and it will show a very difference picture."Rate calculations:Units are smallest in London and the South at 2,580sq ft and are larger in the Midlands and the North at 3000sq ft. The average rent per square foot in London is double that in any other area but average sales in London are only 38 per cent higher. On a square foot basis half of bars and pubs outside the capital are paying a rental in the region of £26 to £36, while in London the rate is £33 to £77. Fleurets measures rental rates by customer area and checks the turnover per square foot. It argues that the amount of space in a site that is available for customer use has the biggest impact on rental value. However, the agent points out that a large bar with a high turnover may not be able to transfer this into higher profits. "We do believe operators would prefer to pay more rent for busier sites and less rent for less successful ones. We know this is heresy that will be shouted down by general practice firms of surveyors, but affordability or ability to pay is key to the successful relationship between landlord and tenant," says Fleurets.
