Competition for restaurant sites to heat up in 2016

20-Jan-2016 - Last updated on 20-Jan-2016 at 16:14 GMT

Competition for sites is expected to heat up this year

The disparity between the supply of and demand for restaurant sites will remain in 2016 and will stretch to more parts of the UK as the market continues to swell says property agency Christie & Co.

According to its Business Outlook 2016 report, the restaurant sector is predicted to grow by about 10 per cent this year, with the fast-casual sector set to fuel the growth.

However, Simon Chaplin, head of pub and restaurants at Christie & Co warned restaurant operators to expect the widespread difficulties in finding suitable sites to continue as growing brands with more available cash start investigating options outside of London.

He said: "The growth of the restaurant sector in northern cities such as Manchester and Leeds is now spreading to other cities, and pressure on space means smaller market towns are seeing branded restaurants coming into the area. We are also seeing London-centred brands heading into the regions.

"One threat for regional cities, however, is that rates and rent increases are coming through. The London market is overheating, some sites are becoming unviable, and some brands need to expand 20 per cent a year to keep investors happy, but they may not find the opportunities in the regions that existed three years ago – there have been examples of £75/sq ft rent outside London."

Growth

Other threats to growth include the introduction of the National Minimum Wage in April which some fear will have an impact on margins.

The report also showed a slowing in the average price rise of restaurant property - up 9.9 per cent in 2015 compared to a rise of 11 per cent in 2014.

Chaplin predicts that entrepreneurs will continue to expand new brands and pubs will win back their share of the casual dining market with growth also to be found within the coffee shop sector.

“2015 brought a wider variety of new restaurant concepts to the market, characterised by the innovative and inspired. As consumers continue to demand more choice, better quality and good service, restaurants numbers will continue to swell.

“The rise of the street food phenomenon was a big factor in 2015, and, as a result, the fast casual sector is the fastest growing at 7-8 per cent a year. Established brands are now trying to replicate this success as they realise customers want something different and to be challenged. Next year we will continue to see entrepreneurs expand new brands from around the globe.”