Restaurants

The UK has one of the most diverse eating out markets in the world, with over 23,500 restaurants serving cuisine from across the globe, and the emerging trends reflect this diversity.

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Millennial consumers driving growth

The overall value of the UK restaurant industry continues to grow, predominantly underpinned by millennial consumers (those born between the early 1980s and early 2000s) eating out with increasing frequency, albeit spending less each visit. It is estimated that 40% of the average UK individual’s leisure spend now goes on eating out, with 31% of the population choosing to eat out at least once a week. These younger consumers are not confined to eating only at traditional meal times, and those restaurants that are able to successfully offer all-day dining seek to benefit.
 

Pub operators steal food-share  

Pubs are taking an ever-increasing share of the eating out market, as operators continue to move from wet-led models to either mixed or food-led offers. In fact, it is estimated that 30% of the casual dining market is driven by Pubs, and sites continue to be targeted by individual chefs and branded restaurants, such as Wildwood and Pesto, alike. The line between pub and restaurant is becoming increasingly blurred and former brewers such as Mitchells & Butlers and Whitbread now refer to themselves frequently as restaurant chains. Customers continue to demand quality, diversity and value, resulting in a wealth of opportunities for businesses of all types, from street food vendors to casual and fine dining.

A healthy appetite for independents

70% of the 23,500 restaurants in the UK are independently operated, and while the strength of brands has been discussed at length in recent years, many individual restaurants have remained popular with consumers throughout this time due to their ability to provide a familiar and reliable customer experience. For this reason, the market for individual restaurant sites has remained steady, and 82% of our restaurant sales are now on behalf of private vendors. 

Private equity seek the next big thing

Fast-growing brands have continued to attract private equity investment over the last 4 years in order to finance expansion. In 2015, this included the Las Iguanas and la Tasca brands by Apollo-backed Casual Dining Group, and Yo Sushi by Mayfair Capital. In 2016, we saw Gaucho, New World Trading Company, Giraffe, GBK and Ed’s Easy Diner change hands. We continue to see private equity invest in a number of smaller brands as they look to find the next big thing.

Cosmopolitan coffee culture

With over 1.7 billion cups of coffee sold over the counter each year, coffee shops have become big business.  There are currently 18,000 such shops in the UK, and this is predicted to grow to 21,000 by 2020, leading some commentators to suggest that the cosmopolitan coffee shop has replaced the role of the local pub in British culture. In particular, competition for high footfall sites in town and city centres is becoming increasingly fierce, with rents increasing accordingly. 

Rents overheating

With innovation running high, and eating out on the rise, the level of competition for restaurant sites has grown significantly in London and primary cities such as Manchester and Leeds, in turn driving up rents and lease premiums. As a result, many operators have sought to reduce risk and increase profitability by focusing on the UK’s secondary and tertiary cities and market towns to fulfil their growth ambitions, in turn driving up competition and rents in those locations. 

For more of our views and detail on the Restaurant market, including Price Indices, download our Business Outlook 2017 publication.

33%

increase in restaurant mandates in 2015

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Restaurants for sale - trends in the regions

Competition for sites in the best locations has kept premiums high and contributed to strong value growth during 2016. In the year to come we anticipate values maintaining their positive trajectory, buoyed by a weak pound encouraging inward investment, albeit softening under the weight of additional cost pressures such as NLW increases and business rates revaluation.

London & the South-East

London continues to be a breeding ground for restaurant concepts with an established street food and pop-up restaurant scene that drives innovation. Competition is fierce for both customers and sites, with rents continuing to rise as a result. However, London’s status as a “must visit” location provides ample opportunity, especially with the current value of GBP post the UK referendum on EU membership. Those who succeed soon look to the surrounding towns and cities to expand, with Brighton frequently being the number one choice. The spread of this dining out culture beyond the M25 has benefited many restaurants in the South East as people seek a quality dining experience closer to home.

The South-West 

Both branded and independent restaurants in the South West have continued to perform well within historic cities with large student populations, such as Bristol, Bath and Exeter, as well as a number of affluent towns and suburbs. Year round tourist locations such as the Cotswolds, and the popular coastal resorts of Devon and Cornwall also fared well, supported by the increasing Staycation culture and second-homers with high disposal income. Additionally, a number of newer concepts are now targeting the South West as part of a strategic roll out. 

The Midlands & East Anglia

As the consumer seeks value and quality, new and varied casual dining concepts are emerging.  Honey pot locations and high footfall areas are most desirable to our buyer base, which are willing to consider both freehold and leasehold units, with size also being a key consideration for generating interest.  Despite competitive pricing, we are still in a recovering market, although competition and demand is pushing up prices in popular areas.

The North

Developments such as Spinningfields and Trinity have played a big part in facilitating the fast expanding restaurant scene in Manchester, Leeds and Newcastle. Emerging chains have spread beyond their southern bases to find a home in the North West. Independent operators and small chains, spurred by the availability of bank finance, are also a strong presence in the market.

Scotland

Glasgow and Edinburgh continue to be the focus for most operators seeking growth in Scotland, with many brands securing sites in a number of new developments and paying substantial premiums for key units. Rural sites continue to experience more turbulent times due to the change in drink driving limits implemented in December 2014, which has resulted in a reduced willingness to travel among potential customers. Consequently, an excellent reputation for food and service is required for destination venues to remain viable.

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