Independent West End businesses fight back against spiralling rents
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Version 0 of 1. Independent West End businesses will begin sharing details of rental costs to combat spiralling rents that are forcing companies out of business. The creation of a database revealing how much each business is paying in rent is designed to significantly weaken the negotiating power of landlords during rental reviews. About 40 businesses that are part of the West End Chinatown Tenants’ Association have agreed to open their books to neighbouring businesses as part of the scheme. It is hoped that as many as 200 independent West End businesses will sign up to the initiative at an event at the Langham hotel on Monday 23 November, which is being described as the largest ever gathering of independent businesses. The idea is being spearheaded by Jon Man, the owner of Chinatown’s HK Diner restaurant, and supported by the Federation of Small Businesses FSB and commercial property firm DeVono. “We are now getting to a point where people are not going to survive with the way rent is going up,” says Man. “When it comes to the rent review landlords always show you their highest yield property and if you ask for details of a property where you know the rent is cheaper they do not need to divulge that information.” Man claims he was forced into paying an inflated rent due to a lack of readily available information on rents in the local area. During the rental review two and a half years ago, HK Diner’s rent went up to £345 a sq ft per year from £300 after an arbitration process. Man says he subsequently found out the nearby Leicester Square hotel, which like HK Diner is also owned by Shaftesbury, agreed a rent of £295 a sq ft shortly before the rent hike at HK Diner. “If I had known the rental value of the hotel they [Shaftesbury] would have lost that arbitration quite easily,” says Man. The burden of rental hikes is not only being felt by businesses in the West End. Man was forced to close his other business, Spitalfields-based takeaway restaurant Keke, when presented with a huge increase in rent. Keke was previously paying £22,000 a year in rent before a new US landlord came in and demanded £76,000 during a rent review, according to Man. If the West End database of rents proves successful, the FSB plans to use it as a model for a similar scheme in Shoreditch ahead of a nationwide rollout. The database will also reveal details including discounts and rent-free periods offered to some businesses, which landlords are not required to divulge when negotiating rent reviews. “London is a bit like a swan at the moment,” says FSB London policy chairman Sue Terpilowski. “On the surface it looks like everything is wonderful because tourists are coming and we have a vibrant business community, everyone says occupancy is at a high level, but underneath it is all starting to crack and people are frantically trying to shore up the holes.” Terpilowski says the pressure on small businesses is being exacerbated by “exceptionally high” business rates and diminishing commercial property stock. Dwindling stock is being driven by commercial property being converted to residential use as landlords seek to cash in on surging London house prices, which in turn drives up the cost of commercial rents due to supply and demand. Man says the majority of the building the HK Diner is located in, which is situated on Wardour Street, is in the process of being converted into residential property. “This building is five floors – the upper parts are all offices – and the landlord has put in planning permission to have almost two-thirds of the building turned into flats,” says Man. Once the offices are converted into flats HK Diner will potentially have to contend with further licensing restrictions around issues such as noise. The FSB claims the current relaxation of planning restrictions from office to residential use is a growing problem. Central London Forward estimates as much as 225,000 sq m of office space could be lost in central London, equating to floor space for 47,000 jobs. With the London mayoral election due in May, small businesses will be hoping the new mayor will help them in their plight. “The next mayor has to make some very bold, big decisions very quickly to preserve the London community of small businesses,” says Terpilowski. “It is at a vital point – we are calling on the mayor to make sure their number one priority is to take a look at this issue when they take office.” The fear is only large chains or betting shops will be able to afford rents in the West End if no action is taken. “My margin keeps on getting smaller and smaller,” says Man. “With a big chain they can cut the costs right down elsewhere in the business. We need to slow down what is happening with freedom of information on rents.” Sign up to become a member of the Guardian Small Business Network here for more advice, insight and best practice direct to your inbox. |