Throughout the North West, there are two key factors that have emerged across the majority of markets in which Christie & Co operates; price and location. Christie & Co continues to see healthy demand for quality assets of all types where the price is in line with market expectations and the bank’s appetite to lend. Location plays a large part in driving this, with the city centres of Manchester and Liverpool, as well as affluent areas and those with a strong tourist economy, such as the Lake District and parts of North Wales and Cheshire, outperforming the rest of the region.
Consistent demand from well-funded, active buyers demonstrates that interest is exceptionally high, as high quality assets across all Christie & Co’s sectors come to the market, with many businesses receiving multiple offers.
As with the wider hospitality sector, location is key and properties in prime city centre, such as Manchester and Liverpool, are seeing the greatest demand from the market. This demand is largely being driven by existing operators who benefit from having the necessary operational experience and financing. Christie & Co has seen this in recent transactions where these operators have submitted multiple bids for both freehold and leasehold assets, with even closed leasehold pubs achieving premiums.
Confidence in the regional restaurant market is somewhat lower than it has been in recent years, but this is mainly due to oversupply, most notably in the casual dining sector. However, Christie & Co identifies notable hotspots for demand, principally city centre sites where well located leaseholds with strong potential footfall continue to attract healthy premiums, despite the higher rents. Expanding regional operators with proven concepts are driving this demand, and the savviest amongst them recognise that refreshing these on a regular basis is key to maintaining viability.
Manchester city centre remains a hotspot for development and investment within the hotels sector. The oncoming supply of rooms is dominated by major operators and as a result, the majority of international hotel brands are now well represented. The city now has more than 18,000 bedrooms, with no sign of a decrease in occupancy rates. Current demand seen by Christie & Co is polarised between budget offerings and those that exceed four stars, with banks keen to lend to proven operators. Hoteliers are demonstrating a desire for opportunities outside of London due to a perception that the market in the capital is somewhat overheated, and realistically priced assets continue to attract interest from serious purchasers.
Christie & Co notes that the retail market across the North West remains price sensitive. Assets that are both realistically and marginally under-priced hold the greatest attractiveness amongst buyers, and thus are transacting more quickly. Forecourts have historically performed strongly at the top end of the market and this continues to be the case, but Christie & Co is witnessing increased demand for low and mid-range assets as well, particularly where YP multiples result in attractive guide prices. A degree of uncertainty resulted in a slightly slower start to the year, although demand is picking up as vendors and purchasers alike regain confidence.
On a regional basis, there is a widening gap between well performing homes and those struggling with regulatory, staffing and cost issues. For those that are struggling, Christie & Co has seen a number of buyers specifically seeking ‘turnaround’ opportunities. This is set against a backdrop of a relatively buoyant market for care homes. Strong prices continue to be achieved for the right opportunities, with a particular emphasis on larger, purpose built homes with en suite facilities. However, Christie & Co notes that some operators will still consider converted homes with the potential to increase occupancy.
Christie & Co has seen an increase in the volume of sites coming to market in 2019, driven by corporate disposal projects. However, this has been equally met with demand from first time buyers and local groups, who continue to purchase sites, as the share of the pharmacy sector operated by independents increases.
Managed sites that have become unviable for long distance ownership, presenting ideal opportunities for locums and newly qualified pharmacists to acquire affordable businesses, Christie & Co has found.
Christie & Co has seen a huge drive from private equity backed operators at the top of the market as investors seek the security of the healthcare sector. Similarly, independents and groups continue to acquire in the North as they are seeing more value than in saturated areas such as the Midlands and the South East.
Generally, there is there is huge demand for NHS practices around the major towns and conurbations meaning well located practices are achieving record prices. However, Christie & Co does note some sensitivity around pricing on offers made for practices in rural locations where there is NHS underperformance due to recruitment difficulties.
With the big talking point in the sector the reformed NHS contract, which will reportedly be rolled out gradually from 2020, it remains to be seen how it will affect values, but Christie & Co reports no let-up in demand off the back of it.
Christie & Co is seeing stronger appetite for acquisition from local group operators with portfolios of four to seven sites this year, as enthusiasm to expand teamed with encouragement from lenders has increased the level of interest on single asset opportunities in the North West.
Cheshire and South Manchester continue to be the most popular locations to acquire in the region, Christie & Co identifies, with interest increasing particularly in those areas which are less saturated with competition.
Additionally, Christie & Co has seen more existing operators seeking out vacant properties or development sites, and an increase of children’s day nurseries being incorporated into new build housing development schemes.
Nick Brown, Regional Director – North West at Christie & Co comments,
“The sentiment across the different sectors in the North West points towards a strong acquisitive appetite from a variety of buyer types – from new entrants looking to take their first steps into the market, through to experienced operators seeking consolidation and expansion within the areas that they are currently trading well.
“On balance, there are challenges across all sectors, but a strong desire from active, well-funded purchasers is helping to drive the market forward. Location has always been a key consideration for the majority of buyers but as prices have risen in specific areas, we have seen the emergence of interest in locations that have previously been overlooked.
“Although a lack of direction from Westminster and the ongoing uncertainty surrounding Brexit has had an effect on confidence across the sectors in which we operate, the North West has demonstrated strong levels of resilience, and as a result, activity levels remain high.”