A theatre, like many other leisure assets, is known as a trade related property. However, unlike other leisure properties such as bars and restaurant there is a great deal of mystery surrounding the value of a theatre and putting a price on one can be complicated.
Aside from all theatres being physically unique, many have values that are within reach of wealthy individuals and consortia wishing to offer patronage to the Arts, often in a highly ‘visible’ way. Smaller theatres historically operating at a loss can therefore still attract premium offers, whereas on paper, they should not.
So while historic and projected trading levels give some guide to value, they are clearly not the sole factor. The appeal of some properties as ‘trophy’ assets cannot be ignored. This is especially the case for West End venues. Furthermore, the general secrecy that surrounds transactions that do take place results in a severely restricted level and quality of comparable evidence upon which investors and valuers can rely.
Therefore, with the exception of venues run by the larger operators, the theatre property sector will likely remain the domain of altruistic investors rather than mainstream property investors/companies, until such time as the returns and risks can be more easily quantified.
However, for developers thinking of including a theatre or performance space within a wider scheme, consideration should be given not only to the value of the venue created, but also to the benefits and worth to the wider development. While on the face of it a theatre might not be able to pay the highest rent for the space available, its inclusion can positively enhance the values and rents of other parts of the scheme.
In Southampton, for example, Grosvenor is developing the Arts Complex in the newly created Cultural Quarter. The scheme comprises two performing arts auditoria, an art gallery, film/media hub, six new restaurants and 38 apartments. Prior to the development, this part of Southampton had become peripheral with many vacant retail units. Savills advised on the restaurant lettings, with competitive bidding received for the units and rents achieved at levels not previously seen in this part of Southampton, thus emphasising the benefits of place making.