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21 November 2016 | Pubs

Clear skies ahead for the North East licensed market

Approaching the end of a landmark year in political and economic history, the licensed market in the North East of England continues to positively weather the storms.

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To set the scene, the north eastern coastline in particular has seen an incredible amount of investment over the past two years. Bridlington has received a £25m leisure centre and plans have recently been lodged for an £8m Premier Inn, the first new hotel in the region for almost 80 years. Scarborough is also due to receive a £1.7bn Potash mine which will create 1000 jobs, a £14m water park, a multiplex cinema and a £45m sports village and football stadium complex. This level of investment will aid in continuing to fuel the tourist economy, and in turn, the transactional landscape looks set to thrive with more licensed operators looking to acquire sites to benefit from the increase in footfall.

We are also seeing an increase in lifestyle and first-time purchasers looking at opportunities in the North East & Yorkshire. The more touristy hotspots of the region, such as Whitby and other parts of the Yorkshire coast and along the A1/A19 corridor are proving popular, as well as the market towns in Northumberland such as Hexham. On the Yorkshire coast alone, Christie & Co reported earlier in the year a 133% increase in licensed properties on the market from the same time last year. There are also a lot of developers looking for these kinds of properties but generally, we are pleased to report that the majority of pubs – when sold as open and trading – remain as pubs.

Newcastle city centre is still in very high demand from operators with a large amount of competition for any sites that become available. Over the past 12-18 months, the Newcastle eating and drinking scene has developed significantly with the area around Monument, traditionally a shopping district, becoming more populated with bars and new dining concepts such as bar and restaurant chain, The Botanist which was recently awarded Best Managed Winner at the Great British Pub Awards. The success of ventures like this is drawing more operators to the locality, such as Jamie’s Italian, demonstrating a demand from residents and visitors for a more diverse offering when it comes to eating and drinking out in the city, with a bigger focus on food than ever.

In the ALMR Christie & Co Benchmarking Report released in September, we found that food is now accounting for (on average) 32% of revenue in the licensed hospitality sector across the country. Sites that are quickly adapting to these consumer needs are the ones which will cope better with other issues affecting the sector. Such issues are the National Living Wage which is set to increase further next year and also a potential reduction of the drink drive limit – as implemented in Scotland in 2014 – which is currently being considered for the rest of the UK.

Leasehold opportunities are more attractive now than they have been for several years. This may be down to the introduction of MRO to the sector and some multiple operators would now rather take on several leaseholds than a single freehold to add to their portfolios. The leasehold market also presents an excellent opportunity for first-time buyers, with significantly less capital needed to purchase a leasehold interest. The corporate market is generally still buoyant with many regional operators looking to grow their existing businesses in and around the North East.

Buyer-wise, while foreign purchasers are starting to look outside of London to take advantage of the weaker pound, they are still tending to prefer the hotel market. However, larger pubs which have a high number of quality rooms are beginning to be of interest in both north eastern cities as well as the more rural areas in the region.

Pub owners that we have been talking to across the area say that consumer spending is continuing at a steady pace despite the country’s political and economic uncertainty – and there is no reason, at the moment, that this will change dramatically. The transactional landscape including sales and values remains largely unchanged in the North East, so operations which continue to adapt to changing consumer needs should continue to reap the rewards at least for the near future.