COMMERCIAL
Christie + Co’s outlook for pubs
£1.5 MiLLion
CHRISTIE + CO The Old Ferry Inn at Bodinnick, Cornwall, Freehold, a retirement sale of the very quaint pub with 12 letting bedrooms and a healthy trading record.
The slowdown in the economy — and its impact on the level of transactions across the pub sector — saw average pub values decline by approximately 29 per cent, from their peak in the fourth quarter of 2007, according to Christie + Co’s latest Business Outlook publication. The annual publication also showed
that pub property values for 2009 dropped by 20.1 per cent, compared to a decline of 11.63 per cent in the previous year. Neil Morgan, head of
£550,000
CHRISTIE + CO John of Gaunt Inn, Stockbridge, Hampshire. Detached country freehouse on the River Test, lounge bar/ restaurant, 2-bed owner’s accommodation and a detached 2-bed letting cottage.
Do it up or knock it Down?
The costs of refurbishment vary widely. However with more still-trading pubs coming on to the market, they’re likely to be lower than with the boarded-up and indeed derelict pubs that used to make up much of the conversion market. Gavin Sherman says “Some people will buy a pub and not spent a penny on it, just live upstairs.” On the other hand, some pubs are knocked down and completely rebuilt, with building costs “between £100 and £200 a square foot.” While rural pubs are often relatively simple to convert, city centre and suburban purpose-built pubs often present a problem. Some are too large for single residential use, and difficult to convert to office or apartment format. For instance the Angler’s Arms, Derby, a Greene King pub, is to be demolished, and a 60 bed care home built on the site. The building, on the outskirts of the city, apparently received no bids for use as a pub – and would not be easy to convert, since the demands of complying with building regulations would probably cost more than a complete new build. Certainly
pubs at Christie + Co said, “On a transactional level, deal activity increased in 2009, compared to the previous year, although volumes were nowhere near pre-credit crunch levels. Prospective buyers continued to find it hard to raise finance, whilst others continued to play a waiting game, to see when values would bottom out. “As we predicted in 2009, regional
brewers and multi-site operators continued to take advantage of the lack of competition from national chains, to bolster their estates through freehold acquisitions.”
‘Punch recently
instructed Colliers
CRE to sell 68 properties which are all part of its turnaround division.’
this is a big area for agents. It’s difficult to estimate quite how big, as some agents are still reticent about disclosing the number of pubs they sell for non-pub uses. Fleurets, on the other hand, states
openly on its web site that it currently has 260 properties available where there is an opportunity for redevelopment or alternative use. The number of pubs on other agents’ books must be three or four times that. Gavin Sherman says, “There are real opportunities out there without a doubt. It’s a question of identifying them – and, of course, having the access to cash to make use of them.” Borrowing for pub purchase – as for other property
Distressed assets will continue to come
to the market, especially in the first half of the year, but Christie + Co also expects transactional activity to increase steadily, as the banks start to free up funding and interested parties return to the market. Morgan continued: “Regional brewers and multi-site operators will continue to make selective acquisitions and will come out of the recession well placed to continue their growth over the next 12 months. In the latter
Neil Morgan, head of pubs at
half of the year, we could see the return of some national chains to the acquisition trail.
“We will continue to see pub closures in 2010. Whilst this is clearly unfortunate on an individual level, we firmly believe that a reduction from the current 54,000 pubs is in the long-term interests of the sector. Businesses that survive the current economic difficulties will be more robust and better placed to have a long-term future.”
investment or development – remains tight, and few lenders are willing to finance homebuyers wishing to convert a property. Even though the economy appears to be looking up, which might stem the flow of some types of distressed property, it seems likely that the supply of former pubs will continue. While the better managed groups, like Mitchells & Butlers, Greene King, Marstons, and JD Wetherspoon, are beginning to see encouraging signs of sales growth, Punch didn’t impress the city with its recent results, and some smaller pubcos are faring poorly. Besides, banks which have so far held back from crystallising their losses may be less happy to subsidise failing pubs in future – and push for quicker sales. The recent VAT increase will also test pub operators – as will interest rate rises. Neil Morgan certainly believes that there is likely to be a good flow of pubs for conversion. “There is little doubt that the UK still has too many pubs,” he says - “and there will be further closures.”
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www.propertydrum.com/articles/pubs
PROPERTYdrum MARCH 2010 61
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