Why confidence in pubs is holding firm, even as costs climb

Throughout the first half of 2025, the UK pub market has shown remarkable resilience, with operators demonstrating great adaptability and a deep commitment to the sector despite economic headwinds and rising operational costs.

Demand for pub and restaurant sites remains strong, particularly in the tenanted and leased sector, which is seen by investors as offering better bottom line resilience than managed house models. We’re seeing pubcos remain active, in both acquiring new sites and streamlining their portfolios, but pricing remains a key factor as purchasers seek good-value opportunities.

The market remains polarised, with strong appetite for freehold assets under £600,000 and premium sites with sustainable EBITDA. London and the South East have seen renewed interest, while demand in regional cities has softened slightly, and lifestyle-led businesses in tourist hotspots continue to attract buyers.

We are seeing transaction volumes rising, with more properties coming to the market as cost pressures prompt owners to accelerate exit plans. Less viewings are taking place, while offers and completions are up, suggesting that prospective buyers are being more selective about the assets they consider, but remain engaged.

Reassuringly, approximately 86% of the pubs we sold in the first half of 2025 were for continued use as pubs, underlining sector confidence and the vital role pubs play in communities around the country. And, in the 12 months to July 2025, we sold 46 closed pubs across the country, 35 of which were to reopen under new ownership as hospitality venues. So, despite cost pressures causing some pubs to close their doors, we are seeing new venues emerge.

One subsector achieving significant growth and outperforming expectations is the pubs with accommodation market, driven by shifting consumer demand and a growing preference for authentic, experience-led stays.

Wet-led venues are seeing a resurgence, with a renewed focus on community engagement and events. Food is no longer a pre-requisite, due to the increasing cost of produce and kitchen staffing. We are also seeing a growing preference for low and no-alcohol options, which is prompting pub operators to diversify their drinks menus to meet changing consumer tastes.

Leasehold assets are increasingly popular, offering lower entry costs – typically in the region of £50,000 to £150,000 - and enabling new entrants to trade at realistic rent levels.

We are seeing an increasingly stark contrast between full-service restaurants and QSR. While traditional venues face mounting pressures, sometimes causing operators hand back the keys to sites which have become liabilities rather than assets, QSR brands are thriving, buoyed by operational efficiency and shifting consumer habits. The same cost pressures apply, but QSRs have proven more resilient thanks to streamlined staffing models, tech-driven ordering, and a strong value proposition. This agility has translated into real growth, both in outlet numbers and sales, reinforcing QSR’s position as a bright spot in our challenged market.

The stability of the lending landscape is a quiet but powerful force underpinning continued deal activity. Loan-to-value ratios have held firm, and interest rates have remained stable and now fallen from 4.25% to 4%, the lowest level since March 2023. Lenders are offering tailored products which reflect the operational realities of hospitality businesses, including flexible repayment structures, support for leasehold acquisitions, and a growing willingness to back both food-led and wet-led models.

To read the full article, which featured in Propel's Morning Briefing on 5th September, click here.