Are private members’ clubs the future of commercial property investment?

The landscape of commercial property is constantly evolving, but one of the most intriguing trends in recent years has been the rise of private members’ clubs. Formerly the domain of exclusive circles and elite society, these clubs are experiencing a renaissance, marking their significance not just in hospitality but as pivotal drivers of real estate development and community growth.

Private members’ clubs have expanded their reach, attracting a diverse array of professionals by offering spaces where luxury, connection, and productivity intersect. For commercial property investors and landlords, understanding how this burgeoning trend can influence property value and overall market dynamics is becoming essential.

The resurgence of private members’ clubs

The revival of private members’ clubs has been driven by a shift in professional and social behaviours, accelerated by the post-pandemic world. As remote work and flexible lifestyles gain traction, professionals seek spaces that blend work, leisure, and networking in a curated environment. Unlike traditional office spaces or co-working hubs, these clubs offer a heightened sense of exclusivity, personalised services, and high-end amenities, making them particularly attractive to high-net-worth individuals, professionals, and corporates.

This shift has led to a surge in new club openings across the UK, from London’s bustling Shoreditch House to tranquil countryside retreats like Soho Farmhouse. The appeal is clear: these clubs offer a sanctuary that seamlessly integrates productivity and relaxation. For landlords and developers, this means a chance to capitalise on a growing market that enhances both the desirability and value of their properties.

Real estate investors are also taking note of what property consultancy Knight Frank terms the “club effect.” Properties located near prestigious members’ clubs tend to experience increased desirability and higher market values. A striking example is the Soho Farmhouse in the Cotswolds. Here, nearby homes sell faster and at premium prices due to their proximity to the club’s sought-after amenities.

This phenomenon is not limited to rural estates. In urban settings, clubs like The Conduit in Covent Garden and The Ned in the City of London have revitalised entire neighbourhoods, attracting luxury retail, high-end dining, and affluent tenants. For commercial landlords, securing a private members’ club as a tenant can significantly enhance a property’s appeal, driving foot traffic and increasing rental yields.

Investment

Historically seen as niche ventures, private members’ clubs have evolved into lucrative investment assets. Their appeal lies in their membership-based revenue models, which offer stable and predictable income streams. Membership fees, often substantial, create a steady cash flow that provides resilience against economic fluctuations. This has caught the attention of institutional investors, who see these clubs as high-value, long-term opportunities.

The market is diversifying. Clubs are no longer just about socialising; many now incorporate wellness programmes, co-working spaces, fine dining, and even childcare services to cater to specific demographics. Clubs are also looking at ways to attract younger members and we have seen children’s open days at the weekend as a new trend.  This innovation not only broadens their appeal but also enhances their viability as sustainable business models within commercial real estate.

Considerations

Despite their growing popularity, private members’ clubs are not without risks. Over-saturation, particularly in major cities like London, could lead to a dilution of exclusivity, one of the key drivers of their success. If too many clubs enter the market without sufficient differentiation, they risk losing their unique appeal and financial viability.

Clubs that fail to adapt to evolving member preferences may struggle to maintain profitability. The recent closure of establishments such as the House of St Barnabas in Soho highlights the importance of innovation and strong community engagement. Investors must conduct thorough due diligence to ensure that a club’s business model aligns with long-term real estate trends.

Investing in or leasing to a private members’ club requires careful legal consideration. These establishments often require bespoke lease agreements that account for their operational nuances, such as extended business hours, noise restrictions, and exclusive membership policies. Landlords should also assess the financial stability of club operators, ensuring they have a sustainable business model that can support long-term occupancy, members clubs are an operational business.

Planning permissions can also pose challenges, particularly in conservation areas or listed buildings. Developers must navigate regulatory hurdles to ensure compliance while maintaining the unique character that makes these clubs desirable in the first place. Licensing agreements, particularly for alcohol and entertainment provisions, must be thoroughly reviewed to prevent operational disruptions that could impact revenue streams.

Service charge arrangements will need careful negotiation, especially where clubs occupy mixed-use developments. Clarity around responsibility for maintenance, security, and common areas is crucial to prevent disputes between landlords and club operators. The structuring of leases—whether traditional, turnover-based, or hybrid agreements—should be aligned with the financial expectations of both parties to mitigate risk and ensure mutual profitability.

Looking Ahead

The private members’ club sector is on an upward trajectory, with forecasts predicting annual growth of 11% and a market value of £25.8 billion by 2027. This presents a compelling opportunity for commercial property investors and landlords willing to align their portfolios with this trend.

For those looking to capitalise on the rise of members’ clubs, the key lies in strategic positioning. Identifying high-growth areas, securing partnerships with reputable club operators, and ensuring legal due diligence will be critical to success. As the market continues to evolve, those who integrate private members’ clubs into their investment strategies will be well-placed to benefit from this dynamic and increasingly influential sector.

At Newmanor Law, we specialise in guiding investors, landlords, and developers through the complexities of commercial property investment. If you’re considering opportunities linked to private members’ clubs, our expert legal team is here to help you navigate this growing market with confidence.