A record number of pubs sold for ongoing use and a 3.3 per cent increase in the average sales price for pubs made for a confident year in the UK’s pub marketplace — that’s according to Business Outlook 2014, the annual state of the markets report by specialist property adviser Christie + Co.
There were signs in 2013 that estate churn — almost a perpetual state in the UK pub scene — had slowed as pubcos reached a point of satisfaction with their estates, having disposed of the majority of their bottom-end estates.
And, despite the continued warnings about the rate of pub closures from some pressure groups, and from inside Parliament, there is evidence that the closure rate has declined.
5% more of pubs sold remain as pubs
Evidence gathered by Christie + Co from its tally of sold pubs in 2013, showed that the percentage of pubs acquired to remain as pubs reached 67 per cent — five per cent up on 2012.
Add to this the continuing trend towards acquisition of pubs by experienced operators and entrepreneurs returning to the sector, and there is every reason for confidence in the sector.
The London ‘bubble’
Amidst the optimism, however, Christie + Co Director and Head of Pubs, Neil Morgan, sounds a note of caution.
Neil says: “While trading performance seemed to improve in general terms, the better results were geographically predicated. London remained in its own bubble, trading-wise, and also saw most of the higher premiums paid for pubs. Elsewhere, the UK regions rather reflected the ‘recession-recovery effect’ — the belief that recession starts in the north and recovery in the south was certainly mirrored in the trading performance of pub companies.”
Strong demand for higher quality pubs
The transactional landscape seemed unaffected by the slow recovery, though, as experienced operators, returning entrepreneurs and first-time, lifestyle, buyers flocked to acquire the higher quality of pub that came to the market during the year. Smaller operators sought to pick-off individual, regional sites to add to their burgeoning estates and there was a real appetite for pubs from tenanted lease estates — again reflective of higher quality pubs coming to market.
Tenanted pub disposals generally declined to sensible levels as the pubcos sought to improve the tenant relationship rather than continuing to fight over the beer-tie battleground.
Morgan adds: “The beer tie is going through a natural evolution anyway, and the pubcos understand there is more to be gained by managing the tenant relationship better and encouraging new tenants into the sector.”
Distress disposals to continue
Distress disposals continue to be something of a way of life in the pubs sector. In late 2013, Christie + Co was instructed by administrators to sell the remaining sites in the Bramwell Pub Company estate, after Stonegate had acquired over 70 sites.
Neil Morgan says: “We should not expect Bramwell to be the last word in distress. As we moved towards the close of 2013, the banks announced their intentions to dispose of billions of pounds worth of non-performing loans, signalling a lessening of their exposure to bad property loans — including some, inevitably, in the pub sector.
Stronger pub trading and values
“2013 sent a strong signal that the pub sector is picking up, both in the trading performance of single units and companies, and in the values being achieved by pubs that are being placed on the market — even those that are in distress.
“As we move into 2014, this state of affairs will alert, and offer encouragement to, those who are looking to either add to their estates, or seeking a return or first-footing in a sector which is looking to grow ever-more-vibrant and stable.”
See all the H&C News sector articles looking in more detail at Business Outlook 2014:
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