Leisure Property: leases of life

Britain's towns and cities are changing fast. When traditional industries die or move out of urban areas into industrial parks, they are replaced by offices, homes, shops ­ and leisure attractions.

As local councils strive to keep town and city centres alive, development focuses on schemes that try to bring together a vibrant mix of components.

They can be grand transformations of a city centre, such as the Liverpool One project, or more modest complexes in a forgotten corner of a town ­ and pubs and bars are frequently part of the plan.

In most cases units designated for licensed premises go to the major bar and restaurant chains. But there are opportunities for smaller independent operators too, as long as you¹ve got the cash and the know-how.

There is certainly no shortage of schemes, wherever you are in the country.

Government policies are designed to encourage the regeneration of urban centres, which initially means shops.

"Retail in towns will continue to be strong,² says John Kinsey, a partner at property agent King Sturge. ³It forms part of the regeneration of an area, and in recent years the government has shied away from out-of-town shopping centres."

Leisure is not usually far behind the shops. There is always a worry about what happens in deserted shopping malls at night, which can be eased by creating an evening attraction ­ maybe going for a 24-hour city. So you find cinemas, theatres, bowling alleys, and around them restaurants, bars and pubs.

"Even hotels are forming part of an urban regeneration," says John. "We are seeing more schemes including residential, which brings with it a further need for leisure elements." A visit to one of these developments, though, might give you a sense of recurring déjà vu when it comes to bars and restaurants. Wherever you are in the UK you¹ll see the same names again and again ­ the big corporate chain retail brands that you¹ll also find on the high street.

There's a sound reason for this. Property agents express it in a single word ­ covenant. In practice this means landlords and developers want to be sure that their multi-million-pound investment will pay for itself, and that means they have to feel confident that their tenants will have no trouble paying the rent in the long term.

"The bigger the company, the higher the value of the covenant," explains John. "If you put a one-man-band up against Mitchells & Butlers, a landlord is going to go for M&B, because it knows it can pay the rent."

As well as the pressure to install tried and tested brands, the tendency is to go for food over drink. Shoppers and cinema-goers will primarily choose to visit a bar for something to eat, rather than to socialise over a pint.

So the brands you find are predominantly restaurants or restaurant-bars, mostly with a strong continental food identity ­ things such as tapas, pizza and pasta are what you¹ll find on the menu.

But there is a strong feeling that landlords and developers are becoming more open to other ideas, and want to bring something else into the mix.

Wet-led pubco JD Wetherspoon is a relative newcomer to this market. After successful openings in shopping centres in Luton and Milton Keynes, in the past couple of weeks it has signed a deal to take a unit in Grove Park, Dunstable. From December its Wetherburgers will be joining dim sum and Italian along a concourse of half-a-dozen outlets built next to a leisure centre and theatre.

"We are well established in railway stations and airports, so this is a logical next step," says JDW spokesperson Eddie Gershon. "The main thing for us is to find a good location. We are not put off by a new build ­ most of the sites we take over need a lot of work ­ and we are certainly well geared up these days to serve a family audience.

"These sites tend to be shared by other good operators, plus cinemas and bowling alleys that will bring in diverse groups, including families. Food is often what they¹ll be looking for. But there's a slight advantage here for pub operators ­ the bar element makes for a more informal atmosphere and people feel they can just pop in for a drink.

"The landlord in Dunstable, too, was interested in getting a good set-up in there, and Wetherspoon¹s has a good name in that respect."

The developer at Grove Park is Complex Development Projects (CDP) which specialises in working in partnership with local authorities.

Wetherspoon¹s is forking out a whopping £1.3m on the project, and it¹s not surprising that CDP director David Freer believes the biggest obstacle to smaller operators getting into these schemes is not the rent, but the initial fit-out costs. ³If you take over an existing boozer the ceilings and floors will all be there, but if you take on one of our units all you get is a big empty space,² he says.

"We have had independents come and have a look and they¹re like a rabbit in the headlights. As well as needing at least half-a-million quid to fit out a bar, they don't know how to do it. They don¹t get off the blocks. In contrast, companies such as Wetherspoon and Barracuda have an army of people to do that for them." There are exceptions, though. Multiple operators with a few outlets under their belts and a sharp concept can have both the vision and the resources to open in a leisure development.

It was CDP, for instance, that a couple of years ago put Ever So Sensible Bars into Priory Place, the centrepiece of Coventry's Phoenix development.

Ever So Sensible managing director Chris Bulaitis describes the Dogma bar there as "a very expensive challenge", costing "around £1m" to fit out. But it is paying its way with a turnover of £1.2m a year. "The rewards are high," he says.

"We are open to all ideas, but quite honestly this isn¹t something we would have gone into if we hadn¹t had financial help from the landlord, who gave us a rent-free period to entice us in.

"Another attraction was that, at 8,000 sq ft, we¹re the biggest operator in there." In CDP Ever So Sensible found a developer that was keen to introduce a creative independent to set the project apart from the high street with its familiar brands.

But opening your bar is just the first challenge. "The problem is that a new development such as this has got to change people¹s habits," says Chris. "It has got to have a strong destination pull ­ we are not in the middle of the traffic and that¹s a downside." Boasting not only a bar but also a restaurant and nightclub, Dogma by itself has the required gravitational pull. But operators might find they need an extra marketing effort to make a new development the place to go.

Another independent success story has been Cargo, opened two years ago by Scottish club and bar operator Festival Inns at Edinburgh Quay in Scotland.

It was the first into the development, which was a mixed blessing, according to operations co-ordinator Susi Conchar.

Edinburgh Quay is in Fountainbridge, an area of the city which has lost its industry ­ including the Scottish & Newcastle brewery ­ and is a 10-minute walk away from the nearest residential area.

Most of the complex is offices, which gives Cargo its custom during the day, especially around its food offer and in providing space for meetings. The challenge has been to make it a destination in the evenings and at weekends for the wider market.

"The area had been derelict a wee while and had never been used for leisure," says Susi. "Most of the residential population of Edinburgh doesn¹t know it exists.

When you say Quay they think it¹s at Leith Docks, which is a long way off! It can feel frustrating when you see so much potential here, and you imagine what it could be like." But now Cargo has been joined by other operators it has been possible for them to get together for a joint marketing campaign that aims, says Susi, to make the complex "a new hub of activity for the city".

"It takes more than one bar to do that," she says. "There have to be other things going on to get people there." C