BIDDING wars between restaurant operators are driving up rents on former retail units in the centre of Leeds following a resurgence of the city’s dining scene, according to a retail expert.
Property firm CBRE estimates that at least 20-30 new restaurants and other eateries have opened in and around Trinity Shopping Centre since it opened almost 18 months ago.
Competition for space is forcing up rents by up to 40 per cent on the most popular units.
New names in Leeds include Byron, Wasabi, Pho, Tortilla, Roast & Conch and Reds BBQ. Five Guys and Itsu have agreed terms to open restaurants.
At least 10 operators are still looking for units in and around Trinity but with fewer opportunities becoming available, competition is fierce.
James Fox, associate director of retail at CBRE in Leeds, said: “The ripple effect of Trinity has created strong restaurant demand in and around the traditional retail pitches of Leeds. This in turn is increasing competition for certain retail units that are potentially convertible to restaurants.”
According to the latest city centre audit by Leeds City Council, there were 129 restaurants, cafes and takeaways in January 2014, plus 113 bars and pubs. There are no comparable figures available for previous years but the council said the number of restaurants alone in the city rose from 83 in 2011 to 90 in January 2014.
The figures are rising every month. Earlier this year, four or five restaurants fought to take over the Austin Reed store on Albion Street. In the end, Sainsbury’s won the bidding war, but Mr Fox said the demand from restaurants had driven up the rent.
Meanwhile, Byron Hamburgers recently moved into the former La Senza store, paying an annual rent of £165,000.
Converting former shops into restaurants is a growing national trend for landlords with units of 2,500 sq ft to 3,000 sq ft to let.
According to Mr Fox, restaurant operators are attractive tenants to landlords because they are prepared to pay more for key units and willing to sign longer leases.
Mr Fox said: “Rents almost dropped off a cliff a few years ago, going down by 30-40 per cent. On certain units, competition is driving rents up towards where they used to be.”
New operators expanding out of London tend to be more willing to pay higher rents than established operators as they focus on rapid expansion.
Restaurants are also willing to take on much longer leases of 20-25 years compared to retailers who will only sign five to 10-year leases, he said.
The city’s growing dining scene follows an alarmingly high number of failures among Yorkshire restaurant businesses during the recession.
Figures from Leeds University Business School show the sector was forced to contract dramatically as consumers cut their spending.
More than 13 per cent of Yorkshire’s 724 restaurant businesses were declared insolvent in 2009. A year later, 8.12 per cent of the 446 restaurants registered in Yorkshire became insolvent.
Professor Nick Wilson, an expert in credit management, believes the Leeds restaurant sector contracted by 20 per cent during the downturn.
“In a downturn, restaurants are often the first to go as people stop spending,” he said. “The recovery has been sustainable and Leeds has dramatically changed following the opening of Trinity and the Arena, so it’s no surprise to see that capacity is increasing again.”
He added: “There is a question of whether there will be an overcapacity. It’s difficult to gauge future demand. We are in recovery but many households are still struggling and aren’t spending money on this type of luxury.”
But Nigel Foster, Leeds Chamber president, is confident the city can cope with the influx of new restaurants. “Leeds is seeing more and more visitors and they are spending more time and money here per visit.
“A good number of the new restaurants are ones that have not had a presence before in the city and their owners will have done their homework to see if there’s a demand for their offer.
“As Leeds continues to grow the demand for more restaurants and other attractions will also increase.”