Underneath the arches: will a rent increase drive breweries out?

The railway arch has provided premises for many small businesses over the years. Car repairs, storage, small manufacturers of al descriptions – and, of course, microbreweries.

A properly lined out railway arch can provide the ideal environment for your mash tuns and vessels. Neighbours are unlikely to complain about any smells you working late, there is usually easy access, and big brick structures help keep temperatures stable.

But of course, one of the biggest draws of all is the fact that rents tend to be cheap. Railway arches are traditionally cheaper than purpose-built industrial units. In some areas - such as Bermondsey’s celebrated beer mile - their appeal is such that true brewing communities have grown up, with brewers interspersed with bottling companies, stockholders and transport and delivery specialists.

However, there could be problems ahead, and the low rents that make railway arches so attractive could be under threat.

What has changed?

Network Rail was, naturally enough, the landlord for railway arches up and down the country, whether or not they still form part of working rail routes. When they sold the commercial property leases of all the arches in the UK in September 2018, there were concerns from tenants that their rent would be increased - possibly to a level so high that start-ups, like microbreweries with a big idea and little established business, would be priced out.

Breweries located in railway arches now say that they are reluctant to expand because of rent hike fears.

And these fears may well be justified. Network Rail made £1.46bn when it sold off the commercial property leases of around 5,200 properties to Blackstone Group and Telereal Trillium in September 2018.

The National Audit Office (NAO) has since concluded that railway bosses only considered tenants of the arches late in the sale and had not considered how to protect those tenants or their businesses. The spending watchdog also found that rent being charged for the properties could increase by 54% over the next three to four years.

A tenants’ charter was published earlier this month after business owners’ long-standing concerns In the charter, the leaseholding Arch Company, committed to being a responsible landlord, working to agree suitable rents for smaller, long-term businesses and having a positive impact on local communities. 

However, many tenants are not reassured. Several brewery tenants have already been forced to move out of arch premises because of rent increases. Some believe that they may be looking at a doubling of their rents in the next review. If large rent increases continue to be imposed on the estate, many small firms will be pushed out of their brewery premises and potentially out of business.

A spokesperson for The Arch Co stated: “We will be long-term investors in our estate. We want to build strong, long-term relationships with our tenants. It is in our interests to ensure that they stay with us for as long as possible and that their businesses thrive.

We’re working with our tenants in a considered way to address affordability issues and ensure that we find solutions during the rent review process that work for all of us.”

Some brewers are looking at the possibilities of collective action, and of setting up a pressure group to help negotiate a solution with the landlord. Others are already looking at other premises.

Are you looking for funding to start or grow a microbrewery? Not sure where to turn? Find out more about the funding available to microbreweries

What can you do?

If your business is in rented premises, the sad fact is that you will always be at risk from a rent increase, or even notice to quit from a landlord who wants more return from their property investment.

A Rangewell, we can provide a number of solutions, including a loan for the deposit on a new lease - and funding for setting up in new premises. But there may be another better solution, which could put you out of the reach of landlords permanently. 

That solution is to make a property investment of your own - and to buy your premises.

With a Commercial Mortgage it should be quite possible for your brewery business to buy suitable property, and spread the costs over several years - with terms of up to 20 years being common. 

With a little help from the Rangewell team, it is often possible to arrange to buy your premises, and acquire an appreciating asset for your business, at a monthly cost comparable, or even lower than you are paying in rent.

A call to our property team could help you find out more. 

At Rangewell we can help you arrange all types of funding for your microbrewery business. Our service - and our finance team’s expertise - is absolutely free.