That’s according to a report by property agents Cedar Dean Group, which found that four in ten operators will have to close for good if the capital continues to get more expensive.
Cedar Dean’s study found that London restaurants coming up to their five-year review face an average rent hike of 50 per cent.
It said that rents in the W1 and WC2 postcodes have more than doubled in the past year, while rents in Mayfair have risen by around 400 per cent over the same period – from £150 per sq.ft to £600 per sq.ft today.
The report forecasts that operators will be paying an average of 20 per cent of their turnover in rent by 2021 if the current rate of growth continues.
A poll of 100 central London restaurateurs found that 87 per cent said they would no longer be able to continue trading in their current form if rents keep rising.
Of this group 40 per cent anticipate they will have to close entirely, while 57 per cent say they will be forced to relocate to a cheaper area. Just three per cent said they thought they could adapt their business model.
‘Adapt or die’
David Abramson, CEO of Cedar Dean Group, said ‘supertraders’ such as Five Guys and Shake Shack were pricing smaller operators out of the market.
He said: “London’s well-loved and varied restaurant scene is a key piece of the patchwork of our city. But many of the jewels in the culinary crown in Prime Central London are threatened by relocation or closure."
He added that restaurants would have to ‘adapt or die’ by changing their offering to maximise sales.
"Having the confidence to adopt all-day dining models can boost the covers a restaurant can process, helping increase profits," said Abramson.
"Restaurateurs need to be more innovative than ever before to make their increasingly expensive central locations work hard for their money.”
Commenting on the report hospitality entrepreneur Luke Johnson, whose investments include Gaucho, Feng Sushi and Grand Union, said that the Government needed to help by easing the ‘wildly disproportionate’ tax burden on food businesses.
“Given the hospitality industry has created more jobs since the downturn than any other sector, the Government needs to treat the industry better,” said Johnson.
“If not, the Government is in danger of killing the goose that laid the golden egg.”