Like most people on the restaurant side, it’s easy for me to fall into the landlord-as-villain mindset. Restaurant operators will climb over each other to secure completely unaffordable leases and then cry foul when the monthly P&L draws gasps of despair.
Restaurant rents in central London are indeed astronomical, and as well as endless closures, this has caused various distortions in the industry: including the boom in street food, and the weekly slew of new openings focussed on simple, high-margin concepts such as pizzas, burgers and fried chicken. Essentially we’re cutting staff costs, food costs and fit out costs so as to give more money to the landlord.
How did we get here? A landlord can’t charge what a tenant isn’t willing to pay (on a new lease at least). Why did so many restaurateurs sign up to rents that they could never realistically afford?
It is - as always - a story of excess. Excessive investment in growing businesses from PE and VC funds, excessive interest from wealthy individuals who don’t understand the market, excessive belief in the value of a flagship London site that can never break even; and - perhaps - excessive optimism all round.
So where are we now?
In a pickle would probably sum it up. Landlords and operators have invested billions in their businesses, agreed rent free periods, co-funded renovations and secured the employment of millions of UK workers…all within a paradigm that no longer exists.
A collection of business groups representing both landlords and operators, have asked the government for 50% grants towards rents for the retail, hospitality and leisure sector. And perhaps that’s a good idea, but it must be said that it’s a sticking plaster at best.
If the aim is to give breathing room while landlords and operators work out a new model that can limit the pain for both sides, then great. And it seems that new agreements are being worked out apace and largely in good faith.
If it is a case of state intervention to prop up a broken commercial model, then it is doomed to fail. However this pandemic works itself out, things will - and will need to - look very different on the other side.
I’ve no doubt landlords, operators and customers will land on a new model. And I hope the government and various trade bodies will accept this reality, and not seek to artificially prop up the status quo.