F&B sector in big cities booming despite UK slowdown

Colin Siebert

The food and beverage (F&B) market in major cities such as Manchester and Liverpool will continue to thrive despite a potential contraction across the sector.

A report by real estate advisors Colliers International entitled ‘Northern Soul’ says that while popular locations in city centres and affluent suburbs in the North West enjoy buoyant prospects with the best F&B sites continuing to prosper, evidence of oversupply of such outlets in other areas means landlords are cutting back on acquisitions, heralding a potential wider market slowdown.

The analysis shows that consumers throughout the North including the North West, spend 14% of disposable income on leisure activities including F&B, the largest proportion of any region in the UK.

Despite rising inflation squeezing household budgets and uncertainty following the vote to leave the EU, resilient consumers nationwide spent £1 in every £5 on leisure in 2016, accounting for £238bn or 20% of all consumer spend and a 6.4% increase on the previous year.

Colin Siebert, director, licensed and leisure at the North West offices of Colliers in Manchester and Liverpool, said: “The remarkable resilience of consumer spending despite increasing pressure on household incomes continues to drive growth across the North West leisure sector, albeit operators are becoming increasingly more selective about locations and rental levels. Many of the major branded operators have curtailed their expansion plans.

“There are some locations where rental levels have peaked and in some instances, may be perhaps unsustainable going forward whereas we have seen growth and increasing rental values in other areas and which are still subject to good demand.

“There are likely to be instances where some operators will not be able to cope with the current economic climate and some sites may well come to market at more attractive prices.

“The consumer is ultimately the winner with a combination of local and independent operators alongside national players providing an increasingly diverse, high quality and constantly evolving offering to meet the demands of the local consumer.”

Colliers records a 30% year-on-year rise in the number of bars, pubs and clubs in the North West, a 21% jump in the region’s restaurant numbers and a 15% hike in cafes and quick service/fast casual restaurants.

At the heart of this growth are the regional ‘capitals’ of Manchester and Liverpool – with Manchester boasting 65% more leisure provision including F&B than the GB average and Liverpool 71% more.

Across both cities, landlords of major retail and leisure destinations such as the Arndale Centre Manchester and Liverpool One have devoted an increasing amount of extensions and refurbishments to F&B and leisure to accommodate demand and increase dwell time.

In Manchester, Colliers reports that several F&B concepts from the South have struggled and failed but locally-based operators including Living Ventures, owner of brands such as Australasia, Gusto and The Alchemist, and Albert’s Schloss understand the market and continue to thrive.

Recent openings include Roc & Rye coffee and cocktail bar in Spring Gardens, Fress, a European-style brasserie in the Northern Quarter and Impossible, a bar offering cryogenically-frozen cocktails at the former Bar 38 on Peter Street.

The city boasts a strong pipeline of openings with The Ivy at Spinningfields, Alston Bar & Beef in Corn Exchange and Kettlebell Kitchen at First Street all due to open before the end of 2017.

Colliers says rental levels in Manchester are largely stable having peaked at £50 per sq ft at Corn Exchange followed by Deansgate and Spinningfields at £40 per sq ft and Northern Quarter sites available at £10 to £15 per sq ft.

The exception to the stable market in the city centre was Deansgate Locks where rents have risen by 40% in recent years to their current average of £40 per sq ft.

Regarding Corn Exchange, Colin Siebert added a note of caution by saying that rental levels there had potentially peaked and would stabilise, with final units likely to be rented at levels below £50 per sq ft.

In Liverpool, more than 17 restaurants opened in the first half of 2017, including Gino D’Acampo and Izakaya on Castle Street, a part of the city once known for banking but now a thriving food and drink quarter.

Also proving popular with local and national F&B providers is the area between Paradise Street and Seel Street, where Cosy Club, Circo, Shed and Zodiac Lounge have opened since December 2016.

Bold Street has enhanced its reputation as a home for independent operators with a range of new F&B outlets and a new hub for independent street food vendors has been created at the BalticTriangle food hall in the former Cains Brewery, where visitors now enjoy food, drink, live music and events under one roof.

Liverpool One and Albert Dock continue to attract significant operator interest with existing tenants agreeing new leases at higher rents. Rental values at Liverpool One have doubled to £62.50 per sq ft since 2011 and increased by 25% at Albert Dock in the past two years.

Among major ‘disruptors’ of the leisure sector identified by Colliers are providers of street food, ping pong bars and ‘experiential leisure’ where specialists including Junkyard Golf, Jungle Rumble and Ghetto Golf spearhead growth in Manchester and Liverpool by offering competitive activities in a social setting with food and drink.

Ross Kirton, head of UK leisure agency at Colliers, said: “Some locations that have expanded their offer rapidly are now starting to see signs of oversupply, leaving some schemes with a more challenging outlook.

“However, the most prosperous and sustainable locations in cities such as Manchester and Liverpool will be those which continue to keep the offer fresh, bring new entrants to the region and carefully curate the offer to meet the demands of the local consumer.

“Our research demonstrates that the sector’s growth has been underpinned by changing consumer habits, increasing numbers of people eating out and consumers shifting towards ‘experiential’ retail and leisure shopping trips.

“The growth in popularity of competitive social activities, such as indoor crazy golf, darts, ping-pong and escape rooms, is fast becoming stiff competition for the traditional restaurant, bar and pub industry. These new activities often provide an option for landlords to let small or difficult space. We are advising landlords to take a very measured approach to their leisure strategy as a number of core operators pause for breath.”