London restaurant demand hits pub rent levels, claims property agent

That’s the view of Jonathan Essex, senior surveyor at Colliers International, who explained that licensees should check the conditions of their lease in order to avoid high rents.

Essex claimed that many pubs in London were being replaced by restaurants, run by operators who are happy to pay high premiums.

“Some pub leases allow the property to be used as a restaurant or a pub,” said Essex. “And therefore at rent review you can find a pub being valued as if it was a restaurant, and you could have the rent going up because there is demand from restaurant operators.”

Balancing act​

He added: “The thing they [tenants] need to look at is what they want the lease to say, when taking a new lease. So they could have it as public house use only, in which case they’d protect themselves at rent review from the property being valued as a restaurant.

“The disadvantage in doing that is if they want to assign or sub-let the property then it can be helpful to have the wider use clause because you can then assign your property to a restaurateur, so it’s a balancing act on whether you go for a wider or tighter clause.”

Essex also questioned whether there was a case for introducing regulation over leased pubs becoming leased restaurants, similar to the Asset of Community Value (ACV) registration. Listing a pub as an ACV gives a community more power to protect it from change of use or indeed demolition.

Neil Morgan, director and head of pubs at Christie+Co, agreed that there was strong demand for licenced businesses in London. “We are seeing lots of activity for freehold and leaseholds so it’s not surprising this is driving rents higher,” he said.