Can the Pizza Hut closures drive positive change in the out of town market?

The UK eating out sector is expected to break the £100bn mark in 2025 and is forecast to grow by 2.6% this year, according to the UK Eating Out Market Report from Lumina Intelligence.

Nevertheless, contrasting with the drive-thru market which remains strong, rents in the drive-to restaurant market have been static for some time now, with the cost-of-living crisis, inflation, and National Insurance increases, amongst other things, weighing heavily on profitability.

On the face of it, the pre-pack administration of the Pizza Hut UK restaurant operation and closure of 68 sites seems like a sign of the difficulties facing the restaurant market.

Unwelcome as it is to see businesses in difficulty, for some owners of prime out-of-town retail and leisure parks, this could, counterintuitively, be a positive development.

The best retail and leisure parks with the highest footfalls already have fast-growing restaurant brands such as Wingstop, Popeyes and German Doner Kebab keen to take space. With fewer vacancies in these locations as existing operators, even those with less popular brands, can make a profit and have no plans to move, new space becoming available should help support these new expansion plans.

Established local operators have also become increasingly important to the market, adding authenticity and variety to consumers’ choices, and should be an important consideration when leasing vacant space.

Strong locations, such as Parc Trostre in Llanelli, Castlegate Leisure Park in Dudley, and Snipe Retail Park in Ashton-under-Lyne, will now have units available on the open market, with good competition likely to drive up rents paid. This, in turn, could create evidence to support rental growth on other nearby restaurants at rent review and lease renewal.

Additionally, with creative thinking, further value can also be created in some of these properties through commercially led planning strategies, for instance, adding drive-thru lanes around some drive-to restaurants, which significantly increases their appeal and therefore rental value.

Each park must, of course, be considered in context, with a clear analysis of its catchment, demand and surrounding tenant mix, but in a challenging rental environment, there is opportunity for growth.