The report, ‘Business Outlook 2020: Focus on Business,
’ reflects on the themes, activity and challenges of the previous year and forecasts what 2020 might bring across the regions in which Christie & Co operates, including Scotland, with offices in Edinburgh and Glasgow.
2019 has been an outstanding year in terms of brokerage and advisory activity for our care team across the UK. In Scotland, Christie & Co transacted in excess of 90% of the market for the seventh consecutive year and the Scottish market has proven resilient when faced with ongoing staffing and funding challenges. Activity from specialist funds has created competitive tension in the market for future-proof, compliant assets and vendors are taking advantage of the best sale prices observed by Christie & Co in over 12 years.
Care operators have continued to focus on improving quality and operational effectiveness. As such, the development of new, purpose-built care facilities has remained a key focus into this year. Christie & Co predict activity will remain high in 2020, with yields continuing to compress. Demand will be seen from a wide range of investors looking to grow and consolidate, including private equity, REITs, regional operators and corporate groups.
The Scottish market remains dominated by the impending early years government policy reform, that will increase the number of funded childcare hours, offered to all three- and four-year olds and some eligible two-year olds, to 1,140 hours from August 2020. As negotiations have progressed, some confidence has been restored for investors, due to signs of a positive outlook for providers. In 2020 we may see a select number of premium quality assets coming to the Scottish market on a confidential basis, which will attract significant interest.
2019 started in a reasonably positive fashion. However, as the year moved on it became apparent that there was a heightened sense of caution in the market, principally due to ongoing Brexit negotiations. Christie & Co have multiple deals in the pipeline for 2020 and have already observed a sense of renewed positivity in the market, as funders in the sector become more comfortable with the political landscape. There is a significant line-up for room-supply in Glasgow, with over 1,500 additional rooms projected to be available in 2020, nearly half of all new room openings across Scotland.
For the retail sector in Scotland, 2019 was notable for prosperous sales at all levels of the petrol filling station market, despite the sector facing challenges, such as increased competition and the introduction of new legislation. Scotland should expect to see steady interest in established and profitable opportunities. Companies will continue to churn estates as operational costs rise, and we should see continued development of retail offers and store standards. As the National Living Wage increases, costs will need to be closely monitored by operators which will impact both employers and consumers in the coming year.
PUBS & RESTAURANTS
2019 was a difficult year for the pubs & restaurants sector in Scotland, with the political uncertainty surrounding Brexit causing some investors to hesitate or delay. Christie & Co observed an increased appetite for wet-led pubs due to cost pressures around staffing.
Notably, alcohol sales decreased in rural locations, which may be underpinned by the introduction of a reduced drink driving limit. As such, Christie & Co anticipate a surge in rural locations coming to market in 2020.
Within the casual dining market, restaurants with the right trading fundamentals are expected to thrive alongside the booming takeaway market. Scottish consumers spent £1 billion pounds on takeaway last year and the market is tipped to continue its growth trajectory via platforms such as Just Eat and Deliveroo.
In 2019, Christie & Co observed a surge in activity in the pharmacy sector for Scotland, with more pharmacies coming to the market, due to higher sale prices and strong demand. It was an outstanding year in terms of transactional activity, with prices amongst the highest ever witnessed by the team. Our deals agreed amounted to a total value of £20,000,000 for the year. In 2020, we will continue to see a steady flow of pharmacies coming to market as prices are soaring.
It was a strong year for the dental sector in Scotland throughout 2019, with transactional activity increasing by 22% against the prior year. Expansion was a key focus for medium sized and corporate groups. Christie & Co observed continued demand across the country for all types of dental practices, although there was a steep increase in demand for private practices, with prominently located mixed practices continuing to sell for premium prices. Overall, the buyer pool remains active with first time buyers, single site operators and multiple operators fuelling activity.
Brian Sheldon, Regional Director – Scotland at Christie & Co comments, “Activity across many of our sectors slowed down towards the end of 2019 as political uncertainty led to a tailing off across the hotels and retail sectors. However, the care sector remained resilient with activity from specialist funds creating competitive tension, resulting in vendors taking advantage of increased sales prices not witnessed within the last 12 years. The day nursery, pubs and restaurants sectors are all confident, although they face similar challenges including increased costs and staffing issues. This has been our best year selling pharmacies in Scotland, with the highest prices we have witnessed, whilst the dental sector saw the continued expansion of medium sized and corporate groups. Across all of our sectors there is appetite for well-established and profitable businesses across the country.”
The full Scotland Business Outlook focus is available HERE