There has never been a better time for incoming licensees to negotiate lower rents or reductions in ingoing costs, according to experts.
Neville Herbert, senior valuer at UK Pub Sales, observed: "The average new leaseholder only lasts in business for around 18 months and typically that is because the rent is too high. There is a huge amount of stock on the market, which gives incoming licensees the chance to negotiate lower rents."
Herbert said there was an "enormous amount of arm-twisting" going on between landlords and licensees as the latter strive to get better deals and improve their chances of establishing new businesses. He said landlords were now prepared to do deals such as lowering the incoming costs for an in-crease in rent or vice-versa.
Herbert has also noticed an increased acceptance among all types of landlords (pubcos, brewer/retailers and private landlords) to allow stepped rents. Initially, the rent is set at a lower level, typically for one year, and then progressively rises in successive years until the target rental is reached.
Matt Bettesworth, managing director of Bettesworths, agreed. "Landlords are aware the market isn't as buoyant as three years ago and are willing to negotiate on rents. Landlords are offering incentives such as stepped rents, particularly if the business is on its knees or closed."
Bettesworth said private landlords were generally more flexible on terms. "Pubcos and brewers usually have formal procedures for setting rents, but over the past couple of years they have become more flexible and premiums have come down considerably."
Graham Allman, of GA-Select, said incomers had plenty of opportunities to negotiate good conditions on leases. He advised employing a valuer.
Chris Whirledge, of Pub Innsite, thinks licensees need to be wiser. "I feel that too many operators think pubcos will act in their best interests. But this is not the case and I think it's become harder to negotiate rents because pubcos don't want to lose any money."