This week, we look at prospects for restaurateurs in prime urban areas. Those who have expanded prudently without accruing debt might look well-placed to swoop on covetable sites that come back to the market as a result of Covid-19. But what will prime mean when a Canary Wharf tenant of 15 years’ standing avers that ‘the notion of putting 7,000 people in a building may be a thing of the past’ (Barclays CEO Jes Staley, April 2020)?
Last week, international law firm Slater & Gordon confirmed its intention not to renew the lease on its Holborn offices when it expires in September. Employees will continue to work permanently from home, meeting only occasionally and in smaller premises. That’s 200 solicitors and support staff who won’t be buying breakfast, coffee, lunch or dinner al desko. No provisions needed for client meetings, at least not as regularly and certainly not in WC1V.
Inasmuch as we prefer not to dabble in prediction, if this trickle becomes a trend, the risk to purveyors of high volume, low margin food and drink seems high.
Negotiating a switch from fixed to turnover rent is the suggestion we hear most frequently, most recently with reference to D&D, Pret and Leon. It’s encouraging to see prominent operators taking a lead on this, but even assuming satisfactory deals can be done, it doesn’t solve the issue of a sudden material drop in footfall.
Until mid-March 2020, such operations were reliant on a steady stream of corporate custom throughout the day, as well as coffees and catering over the course of the working day. Colleagues are going to continue to come together to meet, but this is likely to be in smaller groups, less frequently and more strategically, with specific goals in mind.
The more occasional nature of these meetings means potential for pubs, bars and restaurants to benefit if colleagues choose to socialise together during or after working hours. But a sustained, drastic reduction in the number of people routinely spending at least eight waking hours – and often considerably more – in central London, Monday to Friday, exposes a clear risk to business models that function as part of the supporting ecosystem.
And yet. Just because people are working from home, they are not necessarily working shorter hours. They might be simultaneously homeschooling. The succour and comfort that food – both literally and figuratively – brings to the table, day in day out, are arguably even more valuable now, especially where workloads have continued apace and where employees are keen to demonstrate just how productive they are, out in the wilderness. Demand might not be as high, or concentrated in ‘prime’ pockets, but it is our contention that it’s still out there.
Anecdotally, we seem to be craving what we’re used to. Neighbours rave about being able to buy a proper coffee again from an enterprising local independent’s newly hewn hatch and are perfectly prepared to pay for it. The notion of a sandwich made for us with premium ingredients has taken on an almost luxury quality.
What was ordinary four months ago is now the stuff of myth and legend: St John will start selling its eponymous bread and wine alongside a selection of baked goods from its Bermondsey bakery later this week for the first time since lockdown; it’s reassuring, somehow, to see this focus on the staples that were the foundation of the group’s original 2003-established, Spitalfields site.
Larger businesses with numerous sites are forming multi-disciplinary taskforces to assess their estates, reporting on the health of each site, the opportunity for neighbourhood locations to outperform their city centre counterparts given the right investment and how the growing importance of delivery can be embraced, to cite just a few examples.
Stability, rather than out-and-out expansion, is the new gold standard. It might be achieved by going back to first principles, as per the St John example, by embracing new pockets of growth within an operation or by sensitively and pragmatically adapting a physical layout so that it is safe and feels welcoming.
These are the conversations we’re currently having with our clients and with each other as we prepare for what’s around the corner.