RISE OF THE PROPERATOR…

RISE OF THE PROPERATOR

Having spent the early part of my career working in the property industry, and more recently running a restaurant business, I find the differing attitudes between the property and hospitality world rather stark. 

As hospitality operators, we thrive on finding new and innovate approaches to complex issues. These can range from the mundane to the baffling; day to day life within hospitality is both intellectually challenging and remarkably resourceful.  

The innovation within the industry is borne from three key components parts. Firstly, we are all in it together. We are all innovators and explorers and keen to develop ourselves, our teams and our businesses. Secondly, we are hospitable (the clue is in the name). Very few industry leaders are siloed, and with information sharing so abundant, learning as a collective is embraced and encouraged. Finally, we are immeasurably diverse. Matthew Syed, author of Rebel Ideas (2019) discusses how success is no longer just about talent, knowledge or skill, it’s about freeing ourselves from the blinkers and blind spots and harnessing the power of cognitive diversity. Hospitality has cognitive diversity in abundance. 

OLD SCHOOL

By comparison, the property industry seems stuck in the dark ages. Whilst hospitality welcomed me with open arms without pre-conceptions or judgements, my early property career was assembled based on my regional ascent, questionable bloodline and lack of signet ring. Property can be guilty of being a little antiquated; how long does it take to negotiate a ‘standard’ lease? Why does it take so long to get planning permission when the scheme will only benefit the local authority it serves? How many women are on Knight Frank’s Commercial Board of Directors? These are all things to question in our open and dynamic world. 

The more contemporary property consultants have sought to change this. P-Three and Distrkt immediately spring to mind, and I applaud their fresh ideas and attitude and hope the larger agencies quickly follow suit. Michael Webb, co-founder of Distrkt comments “For landlords to secure the most innovative and creative operators, they need to have a much more modern approach to their leasing model. Those with older, outdated leasing models and strategies are being left behind”. 

Thomas Rose, co-founder of P-Three adds “the property industry has a tendency to be too lazy and just 'build property', but the industry has to transition to focus on people to create better places for the communities which use them”.

PROPERATORS

Largely thanks to this fresh agency approach, landlord attitudes are being steered in the right direction. I have noticed a new breed of landlord emerge; one I have unimaginatively nicknamed the Properator. These are landlords who carefully curate their schemes and take the bold step to fully understand your business model, seeking to structure a transaction around it. It is not just the initial transaction and lease negotiation where properators stand out. During the development stage, they consider your brand objectives, and designs are collectively approved without a single computer saying ‘no’. At launch, a team arrives and a plan is developed with approved photography. This is important - I once witnessed a landlord produce a two-metre hoarding displaying a dish which we had not served in over a year! Tone of voice, customer segmentation and promotional activity are all agreed. Once operational, communication between parties is efficient, serving collective objectives and it is distinctly unbureaucratic.

Battersea Power Station Development Corporation are a fine example of this and easily one of the best landlords I have worked with in almost 100 restaurant openings. Other than visiting one the nation’s finest art deco buildings, there is very little reason to visit Battersea Power Station. However, between the numerous events and activities, the best in class mix of bars and restaurants with a diverse range of price points, boutique cinema, gym and, now, competitive socialising, they have created a destination which regularly draws customers from far and wide. 

‘PARTNERS’

Many landlords renamed tenants ‘partners’ in an effort to show a softer side and prove they can understand the needs of operators. They go as far as quoting extracts from their Good Estate Management clauses in marketing material, but I have sadly seen far too many renege when an opportunity to set a new rental tone presents itself. I vividly remember a shopping centre landlord (who shall remain nameless on account of their recent share performance) who, in their wisdom developed 14 new restaurant units in a scheme which was already oversubscribed on food and beverage and footfall was in 2.3% decline. To be fair to them, and this is where perhaps restaurant operators and their private equity backers should take some responsibility, they let all 14 units, with a huge crossover in tenant mix, at tone-setting rents. Today, the net number of restaurants in the scheme is the same as it was pre-extension; a complete waste of time and money for both the landlord and the operators.

NEW WORLD

It sometimes takes a crisis to shake things up and the acid test for properators will be March 2020 quarter day with the vast majority of retail and hospitality tenants already stating they are not in a position to (or are flatly refusing to) pay this quarters rent. At the time of writing, Network Rail have announced they are cancelling all rent payments due for quarter one and the Government has announced it has extended the moratorium on lease forfeiture to commercial tenants, both of which will provide some relief to tenants. 

Maybe Coronavirus will be the catalyst that forces the more traditional landlords to open up a dialogue with their tenants and better understand their business objectives. Ironically, there have been attempts in the past to regulate the industry through the Code of Practice for Commercial Leases. This self-regulation has largely failed, mainly down to the fact that self-regulation in this regard, with historically nonchalant landlords and overly expansive tenants just doesn’t work; even properators hold upward and downward rent review clauses in complete contempt! 

I’m not daft enough to suggest had the Code of Practice for Commercial Leases been legislative, it would have prevented a health pandemic, but it would have certainly eased the pressure in an already fragile sector, potentially preventing some of the recent CVAs and associated job losses. Who knows, when the dust settles, maybe we will see a clearer and brighter future for traditional bricks and mortar businesses… I certainly hope so.