Rental values under threat

Westminster Council's approach to late licensing is reducing rental values in the West End.

Leisure property specialist Shelley Sandzer is dealing with the 13,000sq ft entertainment site Bad Bob's in Covent Garden.

Shelley Sandzer partner Nick Weir told Estates Gazette: that the property is mostly underground, and needs to be a restaurant-bar.

"We need a 3am licence and, with it, we'd be looking for a rent of £400,000 per annum," he said.

"But Westminster will only give us a licence until midnight, so the rent will be about £250,000 pa. To put it simply, we're struggling."

During the summer, the council published the first phase of its new draft entertainment planning guidance - a document produced to make Soho and the West End more family-orientated. The document means obtaining a 3am licence has become virtually impossible - so bars are moving increasingly to the City.

"The West End has gone stale," added Weir.

"If people can't get 3am licences, they won't get the turnover and they won't open the clubs."

This has resulted in a huge increase in the amount operators are willing to pay for premiums, for sites with existing 3am licences.

According to agents, the eight-story Penthouse in Leicester Square might fetch a rent of about £400,000 pa as a shell, but with a 3am drinks licence for its top two floors, agents estimate that it would attract a one-off premium of roughly £3m.

Jones Lang LaSalle senior surveyor Ben Symes said

categorising sites at rent review is becoming increasingly difficult.

"There will be issues at rent review when it comes to defining the function of an outlet. For example, is a

gastropub classed as a restaurant on an A3 price bracket or a bar - described as an A4? An A4 is more valuable because vertical drinking generates more revenue," said Symes.

He also confirmed that sites that currently hold 3am licences are attracting huge premiums.

"Some up to £5 million," he said.