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 sectors in which Christie & Co operates, including the pub sector.
Following a sustained period of decline and stabilisation, beer volumes are in growth, and official national statistics on employment highlight more people are employed in the sector than ever before. The report suggests the historical decline in pub numbers appears to have been countered by an increase in consolidation into fewer and better-quality premises. This shift has also helped operators to mitigate rising wage and operational costs.
For the Christie & Co team, 2019 involved completing acquisitions and disposals on behalf of a diverse range of international investors, national brewers, regional pub companies and multiple operators. The total value of portfolio transactions reached more than £8 billion, surpassing that which we’ve seen in the previous ten years combined.
Supply opportunity is coming from the continued churn of large tenanted estates, with pub companies such as Marston’s, Star Pubs & Bars, Wadworth and others, off-loading what they considered to be a tail end, as emphasised in the report. Private equity (and private equity-backed operators) appear to be driving demand in the market, and Christie & Co have observed increasing appetite from investors eager to deploy capital into a sector that was previously overlooked by many, and one that still contains opportunities for consolidation, as well as turning around under-managed and under-invested businesses.
In addition, the report highlights that properties with letting rooms continue to attract significant demand and are a key feature of many businesses’ growth strategies. This diversification of income through the additional stream of rooms revenue is considered as a more profitable business model.
Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:
- Traditional family-owned pub companies and brewers are expected to continue expanding at a slow and steady pace, whilst bringing the tail end of their portfolios to market
- We expect to see further M&A activity within the pub sector as private equity continues to seek tenanted, managed and franchised portfolios and consolidation opportunities
- The pub sector will continue to evolve with innovation and diversification of the pub offering coming from the independent freehouse sector
- Properties with letting rooms will continue to attract the highest demand, representing a more diverse income stream, and a more mature entry point for investors
Stephen Owens, Managing Director – Pubs & Restaurants at Christie & Co comments, “We witnessed a considerable amount of M&A activity in the pub sector throughout 2019, which we fully expect to continue going into 2020. We now have a leaner, healthier and better invested sector which appeals to a broad range of investors who are attracted by the prospect of significant returns and additional security that the underlying pub assets represent.”