Assessing the real estate landscape for the leisure and hospitality sector
Ian Corfield and Alex Patey highlight the challenges and opportunities facing leisure and hospitality operators when it comes to their real estate
On March 26th, we will be holding our 2025 Real Estate Conference at the Barbican Arts and Conference Centre – an afternoon of thought-provoking interactive workshops and networking that will explore practical tools and strategies to help businesses navigate the challenging economic landscape and lay strong foundations for the year ahead.
Here, FRP Restructuring Advisory Partner Ian Corfield and Corporate Finance Director Alex Patey share an insight into one of the key issues they’ll be discussing on the day: what the evolving real estate landscape means for leisure and hospitality operators.
Much ink has been spilled chronicling how the COVID pandemic impacted the leisure and hospitality sector with operators in the sector facing a raft of headwinds – many of which have their roots in, or were accelerated by, the pandemic. These are pressures that they must adapt to, or risk falling behind.
Shifting priorities
One of the biggest challenges facing operators today is the need to identify and accommodate shifting footfall patterns and a renewed customer landscape.
Traditionally, businesses have worked under the assumption that weekdays are busier in city centres, while suburban areas tend to attract more crowds over the weekend.
However, the rise of hybrid working, combined with the growing incidence of residents moving away from city centres post-pandemic, and younger consumers displaying very different tendencies to their older counterparts, has completely upended this cycle, leaving many businesses caught short with extensive real estate portfolios that no longer cater to consumer habits.
A shortage of available commercial stock is also impacting performance and driving up rents, with businesses locked into expensive rental agreements based on a 365-day business model which may no longer be viable.
Together with inflated input costs, which are falling at a slower pace than initially anticipated, these higher rental prices are having a real impact on the bottom lines of pubs, hotels, gyms, bars and restaurants. This will only be exacerbated by the looming increases to Employer’s National Insurance Contributions and the National Minimum Wage, which trade body UKHospitality predicts could cost the sector up to £1 billion.
As a result, many are having to cut overheads, or pass the price rises onto consumers – a difficult move in a landscape marked by weak consumer confidence and caution around discretionary spending.
Navigating this ever-evolving real estate landscape will be integral for leisure and hospitality businesses looking to continue to grow and maintain their resilience.
That being said, evolving trends are also presenting new opportunities for proactive, prepared operators.
Redevelopment projects across the UK, driven in part by the government’s plans to expand devolution and encourage housing delivery, are revitalising high streets and attracting new residents into areas that have traditionally lacked footfall – opening a window for established brands to expand, or offering hope of much-needed boost for those who may be struggling.
With the pressures of recent years contributing to an uptick in business closures, we anticipate that vacant or underutilised spaces, which are often available at a reduced rate, will present opportunities for new entrants or expanding operators
Similarly, the post-pandemic shift towards home working has impacted demand for office space, which the leisure and hospitality sector is moving to capitalise on. The City of London is a good example of how the sector is driving change-of-use, with several office-to-hotel projects underway or recently opened. Indeed, in 2023, major applications for residential and hotel schemes in the City accounted for nearly a quarter (23%) of the total, up from just 8% in 2021.
Alongside this, we’re also seeing an uptick in mixed-use propositions, with hotels incorporating destination restaurants and even music venues as part of their properties, as operators look to make the most of the space they have and capture more consumer spend.
Seizing change
Navigating this ever-evolving real estate landscape will be integral for leisure and hospitality businesses looking to continue to grow and maintain their resilience. Considering new formats and site openings in locations they once wouldn’t have ventured into is proving a worthwhile pursuit for a number of operators as well, and we expect to see that continue as the sector evolves.
How this can be achieved will be a key topic of discussion at the Real Estate Conference, and something we’re going to explore in more detail in the workshop – Redefining Leisure and Hospitality: Adapting hotels and restaurants for a changing world – alongside panellists from Christie & Co, Axiom Hospitality and Barclays Corporate Banking.
To learn more about the event, see the full agenda here.
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