This Is What It Will Take To Save London’s Night Time Economy

London’s night-time economy is in a dire state: Perhaps no other sector has been harder hit by the pandemic. But all is not lost.

London’s pubs, bars, restaurants, nightclubs, concert venues and theatres are vital to the UK capital and its property owners. Not only do they provide £66B to the city’s economy, according to the Greater London Authority, but they provide that buzz of excitement that has proved a magnet drawing people in for centuries. The pull they provide for property owners is invaluable.

In spite of the dramatic decreases in revenue that these businesses have seen in the past six months as a result of the coronavirus pandemic, all is not lost, according to panellists on Bisnow’s webinar Saving The Heart and Soul of the Vibrant Nightlife Economy. But it will take a co-ordinated effort between central government, local authorities, operators and, to a massive degree, property owners to make sure everyone gets out of this on the other side. 

For property owners, rental concessions are key, but it is not the only thing that can be done to make sure landlords and tenants are working together for the benefit of everyone. 

“We need a clear government roadmap to show us the way through the crisis for the night-time sector, but we don’t have it,” Greater London Authority Night Czar Amy Lamé told the webinar audience.

She pointed out that nightclubs are one of only two classes of business that are still forbidden from opening under government rules, alongside sexual entertainment venues, and yet there have been no specific support packages put in place for club operators and venues. The GLA has put in place a £2.3M fund for businesses in the sector, but that doesn’t do much for businesses that have had no revenue for more than six months.

“We’ve been pushing to be allowed to run test events, but we can’t, because venues can’t open,” she said.

Trading for restaurant businesses has been up and down since lockdown ended, according to James Hart, co-founder of the Harts Group, which owns 11 London restaurants including the award-winning Barrafina tapas brand. 

“We made money in July, which was a nice surprise since we were expecting to take a loss, and then in August we had our record [best] ever month,” he said. “But that was to a large degree a result of the government’s ‘eat out to help out’ scheme, and we will have to see how things go now that has finished.”

He pointed out that even though restaurants have been trading well, many in London also run catering businesses, which have been completely moribund because of the lack of events to cater for. 

Hart said the temporary changes to licensing laws that have allowed restaurants to trade on pavements to increase capacity have been vital in helping restaurants trade profitably — reduced capacities mean that operating only indoors would mean trading at a loss.

But there were worries from him and other panellists that once the temporary legislation expires, local authorities would push back against the changes.

“It’s created an incredible atmosphere,” he said. “I accept that some residents think it’s a negative but if you look at the data, the number of instances of disturbances has been low, and the business case means it must at least be worth exploring making wider changes.”

A number of London boroughs are undertaking a review of their licensing policies, and Lamé warned that some might use the current low footfall at leisure businesses to bring in changes limiting the number of licenses they grant in future, in order to appeal to residents that complain about noise.

“We need to make sure this is about data, not politics,” she said. 

Property owners can play a key role in activating streets to draw people back to city centres and get them using night-time leisure businesses.

“A huge part of what Covent Garden, and London in general, does well is culture, the arts, music and festival,” Capco Executive Director Michelle McGrath said. Capco owns the majority of the famous Covent Garden area of London’s West End.

“We have to do everything we can to get the best of our city up and running. We’ve done everything we can to activate the piazza, so we’ve put a free cinema there for people to come and use. I’d encourage landlords to collaborate with what’s on your doorstep. It can be hard to do culture indoors, but we can bring it on to the streets.”

Capco’s near neighbour Grosvenor has also been working with its tenants to bring its Mayfair and Belgravia districts back to life. It has provided financial support to help the local authority and tenants safely institute outdoor dining and drinking and provided capital so its food and drink businesses could keep offering the “eat out to help out” discount beyond August.

It has also provided information to the 65,000 residents in properties it manages in Belgravia about what is going on in their area, encouraging them to get out and use local businesses, and created a partnership with tech firm NearSt, which allows retailers to showcase their inventory to nearby shoppers undertaking digital searches. 

Of course, a major part of the support landlords can provide is financial, in the form of rent concessions for struggling tenants, something that both Grosvenor and Capco have provided. Grosvenor waived Q2 rents for all retail and leisure businesses that had been forced to close.

“It’s totally in our interest because in the long term it helps our districts to succeed,” Grosvenor Director of Belgravia Paul O’Grady said. 

From here on, the company is undertaking individual negotiations with individual tenants, and deciding on a case-by-case basis what kind of rent support to provide for tenants. And O’Grady made a subtle point that is often overlooked in the debate about negotiations between landlords and tenants over rental payments in the current crisis.

“If those tenants that are better placed financially do pay their rent, then that enables landlords to support those tenants that are struggling.”

“For the majority of hospitality brands, they are experiencing severe cash flow issues, so we are looking at what we can do beyond just a month or two rent holiday.”

Hart said that in the main his company’s landlords had been supportive, but that was not always the case. He added that longer term he expected there to be a move toward turnover rents to allow greater alignment of interest between landlords and tenants.

On the whole, landlords had been supportive of tenants, but around 20% to 30% had been trying to put pressure on tenants to pay even if they couldn’t afford it, RSM partner Damian Webb said. “That is unhelpful because it means the good landlords end up subsidising the bad ones.”

He agreed that the leisure sector in particular would see a widespread shift to turnover leases.

“If you had said to landlords in January that they would have to accept rents amounting to 3-5% of turnover with a series of ratchets, they would have told you where to go,” he said. “But anything that happened before COVID is irrelevant now.”

He added that on the whole banks were not putting undue pressure on borrowers that might not be able to meet interest payments because they’ve given tenants rent cuts.

On top of all this, there is also something more intangible that will ultimately be as important as any of the above factors: creativity and innovation. The people involved in the sectors that fuel the night-time economy are inherently creative, whether their passion is food, drink, music or theatre. And at times of stress, this comes to the fore. 

“In challenging times like this, creativity tends to thrive,” McGrath said. “We’ve been so impressed and astonished at just how creative operators, retailers, musicians have been in adapting their offering, connecting to their consumers, and maybe even strengthening their underlying product. They are the ones who will come out of this stronger than ever.”