Spotlight on the UK property market with Kieran Sherlock

When asked to write a "witty, deeply insightful, and highly informative article on the current state of the UK leisure market," I found myself reflecting on how things have changed since I began my career in leisure property…

This year marks 30 years since I graduated from Sheffield Hallam University (or Sheff Poly as it was known then). My first job was with Whitbread Property as an estate's surveyor, but I quickly realised estate management wasn’t for me and moved into acquisitions, working on Premier Inn’s (the UK hotel brand) central London expansion. It then struck me – I’ve essentially been doing the same thing ever since! So, what’s changed in the UK leisure market over these years?

Firstly, rents have increased. Recently, I was offered a site in Brighton, the first one I acquired for YO! Sushi in 2003. Back then, the rent was £60,000 per year; now, it's £120,000. Rents outpacing inflation isn't surprising, but what has changed is the way that rent increases are calculated. In the past, rent reviews involved complex valuation techniques, but now landlords and tenants are more open to inflation-linked methods such as RPI or CPI. From a tenant’s perspective, this makes it easier to model costs, though uncapped inflation can get scary.

Secondly, landlords have shifted focus from covenant strength to the quality of the tenant’s concept and management team. Covenant strength was paramount when I started, especially with Whitbread and Mitchells & Butlers, but now, emerging brands are often favoured. At Imbiba, we back early-stage businesses with great management teams, and landlords are keen to work with us, despite sometimes having more challenging balance sheets.

The pandemic also highlighted the advantage of having tenant entities in SPVs without parent company guarantees – a benefit in some negotiations with landlords.

Finally, a major change has been in planning law. The days of rigid A1/A3 use classes are gone, and the decline of retail has created opportunities for leisure businesses in city centres. Shifts in prime retail areas can significantly impact property rollouts, and understanding these trends is crucial for success.

 As I look ahead, one thing remains clear: securing the right site, in the right location, at the right rent, will always be key.

Want to talk property with Kieran? Get in touch.