Shelley Sandzer - In conversation

13/09/2016 - 11:36
Shelley Sandzer, the leisure property specialist, has over 30 years’ experience in the business of acquisitions and rent reviews across the leisure sector.

Eat Out caught up with Duncan Lillie, managing director of the professional services team, and joint managing partner, Ted Schama to discuss the latest market trends, changing consumer habits and the post-Brexit landscape.

Founded in 1983 by Trevor Shelley and Phillip Sandzer, Shelley Sandzer began life as a retail and leisure agency, before slowly evolving to the leisure-only property business it’s renowned for today. In 1996, Nick Weir and Ted Schama joined the business as partners, followed by Duncan Lillie in 2002.

It was at this point that the transition within the business escalated, the retail specialist Sandzer retired from the business and Shelley’s passion for the leisure and hospitality industry came to the forefront. In 2008, the team received the tragic news that Shelley had died suddenly at the age of 53.

Following the news, the team, led by Lillie, Schama and Weir, began the difficult task of figuring out how to take the business forward without Shelley. Lillie was to focus on developing the professional team, which includes rent reviews and lease renewals, while Schama and Weir headed the agency team.

Since then, the team has been responsible for a number of international debuts to the market, including Five Guys at Leicester Square and Sushishamba at Heron Tower. Shelley Sandzer has also helped a number of new concepts launch, including Patty & Bun, and worked with high profile restaurant chains, such as Jamie’s Italian, Cote and Byron.

Eat Out: The restaurant market seems to be constantly evolving and shifting, how do you think the market has changed in the past 10 years or so?

Ted Schama: We do a lot of travelling and research for international operators and through that it’s highlighted to us how the restaurant market has changed. We’ve become more global and we need to see and taste the experiences as advisors. We’ve got clients in the Middle East and Far East. But, when we travel, it brings home how incredibly eclectic the food mix in London is, in comparison to other European cities. 

Duncan Lillie: From a general level, I suppose it’s become either more sophisticated or more diverse. You can still go into retail and leisure parks and you’ll find the typical ‘boring line up’ and you just think ‘why would I want to eat here’. That’s what the high streets and city centres were like 10 years ago though, not very exciting, very dry and now, even within the casual dining sector, you’ve got a more dynamic market than we’ve ever seen before.

Even in the fine dining sector, a diversification is happening. On Berkeley Street, you used to have Nobu and that’s it, now there’s a whole string of restaurants down there. So they’ve all clustered and now dedicated parts of London are now renowned for that. Then you’ve got the offering

From our point of view it’s gone from just renting the space to now talking about the tenant mix and ensuring the brands compliment each other not compete. However, there are some brands that come out of London and into the regions and just fail. They either don’t want to pay the price or find the food too sophisticated. I still think brands find it difficult to travel but it’s certainly more diverse.

EO: What about rental growth? In London especially prices seem to be constantly rising, is there any chance of the bubble bursting?

DL: If you go to Wardour Street, rents are up around £140 when they were £80 only two years ago, the Southbank has gone from around £35 and there’s a deal about to happen at nearly £100. This is the ripple effect that we’re experiencing after some of the more sought after areas like Soho

The interesting thing for us, especially working for clients, is ‘how can we possibly suggest a rent at that level?’ and it’s because the market dictates that that’s what the level should be. People still want to be in London and are ultimately still prepared to pay those rents, at the prices those rental profiles suggest.

In Cardiff, we’ve gone in St David’s from £35 a foot to £62.50 so even in the regional hotspots. If you come out of Cardiff St David’s from Nando’s where it’s £62.50 and cross the road to Cote, it’s only £40 a foot. So it demonstrates just how strong those ‘sweetspots’ are in comparison with others, but the regional high streets are still struggling, we thought for a while that might not be the case but people want to come out of the centres because they’re too expensive. Risk taking is something that isn’t in the forefront of people’s minds when going into the regions.

TS: I think we’ve seen the end of this really aggressive growth of rents in central London, I actually think that started to end towards the end of the last calendar year.

DL: It’s started to come to an end, I remember saying the Caprice deal on Sexy Fish at £185 a foot was the peak.

TS: I don’t see the bubble bursting though, I do see challenges and quite considerable challenges at that. I was speaking to a restaurateur earlier today, he was having real trouble recruiting trained sous chefs. This is one of the biggest problems in our sector. Rental growth is another big challenge, just because the rents appear to have slowed down, Duncan can be catching up in rent reviews one, two, three, even perhaps four years lag in rates.

Cost of products too, the drop in the pound may sustain some tourism, but the cost of products from overseas is going to become more expensive, at the same time you don’t want to push the costs to your customers. It’s especially problematic in the real mid market restaurant business, because there isn’t any movement. People know what they expect to pay and that’s it. If you want to charge more, you run a very serious risk of them going to a rival concept.

On top of that, Brexit is going to pose many more serious challenges, luckily we’re in a very robust sector, very resilient and I think that people change their habits slowly and I think we’ve benefitted from a decade of people being used to dining out a lot.           

EO: Delivery seems to be one of the fastest growing areas of the market, with the likes of Deliveroo announcing multi-million pound investment deals and Uber Eats launching in the UK market. Is this beneficial or does it present a whole range of new challenges?

TS: Deliveroo and other services like that are multi-edged in terms of its benefits and challenges. The obvious benefit from a restaurateurs point of view is that they’re seeing 10/20% topline growth, then you’ve got the property consequences, with operators now designing sites slightly differently in order to have a dedicated area for our ‘helmeted friends’ so they don’t disturb customers in the restaurant. Urban centre owners are also seeing the potential in delivery.

You’ve also got some restaurants who don’t lend themselves to the Deliveroo experience and they’ve got to ensure what they offer is second to none. So there are many advantages and disadvantages to be seen. I think it’s still early days in seeing any major structural changes happening because of delivery, in the same way that online has affected the retail market.

EO: What about the prospect of operators opening delivery-only sites with no front-of-house?

TS: You need a vibration, you need a presence and you can’t get that by Deliveroo only really. I can’t see at the minute a disconnect between physical sites and the delivery experience. Undoubtedly there has been a change that is happening and we’ve not seen the end result yet – with retail it took, nearly 5/10 years for the change from nothing to whatever it is today, in terms of percentage of sales. I don’t see it as dramatic though, people are always going to want to eat out.

EO: There also seems to be a blurring now between casual dining, grab & go and home delivery. Is it becoming increasingly important for operators to cater to all markets?

TS: If their category fits it. But you’d be mad not to.

DL: The only restriction could well be if the landlord lets you, if you’re in a high profile site, often the landlord will not want any sort of takeaway, because it can change the dynamic of the pitch, normally they allow around 10/20% of sales.

TS: There was a council in central London that restricted takeaway. Five years ago it would have been glossed over, today it’s fundamental because the restaurant could be losing 10% of its topline. Massive ramifications on planning, landlords and operators. We’re only at best half way through that journey, it’s not fit for everybody. There’s a long way to go for Deliveroo to get everything right. The consumer is very fickle, one bad experience is normally enough for them not to go back voluntarily. So, we’ve got a long way to go until this newer landscape settles.

EO: What does the post-Brexit landscape in the restaurant and leisure sector look like?

DL: Well, in Central London, the pound is cheap, plenty of people are coming here, but it will start to filter through in costs of running the operations. Rents are not going to get significantly higher and a lot of restaurant groups are pulling back on their site acquisitions next year, and as we are seeing certain high streets in the provinces, rents are actually starting to go backwards. I think it will put a cap on London, and outside London on the high street it might have an effect.

Now, when we’re doing rent reviews it’s impossible to reflect ‘Brexit factor’, because rent reviews tend to lag behind the market anyway, because you can only pick on things that have already happened. There’s no evidence to reflect that Brexit is having any effect yet.

TS: We had a grizzly few weeks of deep uncertainty that did have an impact on business, a lot of which we’ve now caught back. Brexit coupled with all of the other challenges we’ve touched upon earlier, mean the sector’s entered this much more ‘sensible’ phase. We’re not about to fall off the track, but this is undoubtedly a more sensible phase – same hard work, different set of challenges. We, as a sector, are so robust and resilient and we’re absolutely chuffed to bits to be in it. I’d far rather be in this sector during this time than any other, and at any other time for that matter.

By Nathan Pearce

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