Rental demands holding pubs back from reopening

Rental demands from landlords to leisure and hospitality businesses is causing grief for many including The Queen’s Head in King’s Cross that is in the eye of the storm as it is suffering from a severe loss of tourists and office workers.

Many pubs and bars along with other hospitality businesses are frustrated by the demands of landlords for full payment of back rent over the four months they have been closed and also by the government’s failure to help sort out the current stand-off between landlords and tenants.

Although Nigel Owen, owner of the Mother Kelly’s bars and The Queen’s Head, is appreciative of the government’s help to date with the likes of the furlough he is disappointed by its inaction over the increasingly painful scenario of rentals.

“Why has the government not put in place something to help the landlord/tenant relationship? Whether it’s penalties or payments. We appreciate its help to date but it has not got its head around this main problem,” he suggests.

He would be happy to pay the regular rent on The Queen’s Head from this point on if he were to reopen as he would hope to bring in £4,000-5,000 per week – representing 40% of the former trade – which would enable him to bring in sufficient to pay wages, VAT and suppliers.

But the problem is the back rental that the landlord continues to demand. What frustrates operators like Owen is that if he were to abandon the pub he knows the landlord would likely take three months to find a replacement and then also have to offer an inducement of up to a nine-month rent-free period to the new tenant.

Surely therefore it makes sense for the landlord to waive the missed rentals. Not so. It prefers to hang on in there hoping for full payment of back rent in order to avoid taking a hit on the book value of the property. Since the landlord in this case has hundreds of commercial properties the effect across the whole portfolio would be sizeable.

Although Owen says most landlords are playing the same game he has positive things to say about the understanding stance taken by The Arch Company, which owns the Mother Kelly’s sites in Bethnal Green and Vauxhall, which gave a rent-free period during lockdown. This is the company that owns thousands of railway arches around the country and rents them out to many small, independent businesses.

“They understand where the world is. It has all been very clear and they’ve been communicative. The ‘Guardians of the Arches’ have also done a great job negotiating on all the tenants’ behalf,” says Owen.

While the Bethnal Green site is doing 60% of its regular trade – having removed 30% of the furniture and banned vertical drinking – as it benefits from its core clientele living nearby, the Vauxhall unit is more problematic.

It is very dependent on office workers and when it reopens it will be on the basis that it will take some time to build up trade again: “Offices will come back but not to the same degree.” Even more of an issue is King’s Cross and The Queen’s Head. Prior to Covid-19 its customer mix comprised: 30% tourists in hotels in the area; 20% local office workers; 30% people travelling to and from the station; and 20% local residents.

“It’s very worrying. The office trade will come back but it won’t be overnight. Who knows when the tourists will return and what about the people coming and going from King’s Cross station for business? Will they be having face-to-face meetings in the future?”

But for now Owen simply wants to get his bars and pubs up and running again. To get his employees back behind the bar and to begin welcoming customers back to the front of the bar.

Glynn Davis, editor, Beer Insider

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