Pubs for sale – trends in the regions
The pub market is buoyant, with demand for good gastro pubs and community pubs with a strong food offering, as well as letting rooms, becoming a key driver of value. However, there continues to be some uncertainty surrounding The Pubs Code and MRO legislation, which has softened demand for leases. Nonetheless, finance appears readily available for well located businesses with good trading records. Cost pressures arising from various legislations such as National Living Wage, the Apprenticeship Levy and Business Rates Revaluation expected to come in to effect in Q2 will lead to some distressed operators, and present opportunities for Pub disposals.
London & the South-East
We continue to see increasing demand for profitable accommodation-led businesses within honey pot areas, with an appetite for food-led operations outweighing demand for wet-led businesses. However, the leasehold market has been softened slightly due to recent MRO legislation.
Finance is increasingly available, and bank lending continues to grow. Experienced operators are acquiring pubs at both the top and bottom end of the market, looking for either a successful going concern or a closed business that can be grown and developed. Equally, private equity backed multiple operators continue to lead the way, acquiring high turnover businesses targeting select niche areas. Our mid range market is made up of mostly local buyers within a 30-40 mile radius of a pub, often having known it for some time prior to their interest.
Uncertainty in the wake of the unexpected result of the UK referendum on EU membership has led to a reduction in the number of potential buyers selling a London property, exiting the city and using the proceeds to purchase a pub within easy reach of the City. Accordingly, a number of opportunities exist for savvy investors to acquire some excellent assets.
In the South West we are seeing high demand for underperforming, under invested, freehold pubs, where the discerning buyer can see a clear upside in value by changing the dynamics of the trade, for example by adding letting rooms or increasing the dining space. There is also increasing appetite for managed house opportunities, particularly from group operators, with an increase in the number of transactions in this market segment. Free-of-tie leases remain popular due to the relatively low cost of entry (compared to a freehold) and tend to attract experienced operators who still have their concerns over the uncertain future of the tied leasehold model.
The Midlands and East Anglia
The Midlands and Anglia pub sector continues to have its challenges although a number of areas are appealing to both existing and first time operators. Similar to the North the greatest demand now seems to be for mid-sized family orientated community pubs with a good food offering, with good road links and close to retail and shopping areas with high footfall. Rural coaching inns are also proving popular. Location remains paramount with market towns or trunk roads with access to tourist destinations or areas of commerce. Operations with micro breweries are also looking to expand their offering throughout the region.
The flood of budget, wet-led, pub company disposals coming to market in recent years has now reduced to a trickle, although these affordable opportunities invariably attract buyers relatively quickly. The greatest demand at present seems to be for mid-sized family orientated community pubs with a good food offering, on large sites, ideally with good road links and either close to retail parks, shopping areas or any other provider of all day footfall. Similarly, the rural coaching inns attracting the most attention tend to have development potential to increase room numbers, are located in market towns or on trunk roads with access to tourist destinations or areas of commerce. We have seen a number of expanding and acquisitive leisure operators actively pursuing these opportunities.
The reduction to the drink driving alcohol limit introduced in 2014 has had a dramatic effect on pubs across Scotland. The “after work pint” is now generally a thing of the past and operators are reporting their businesses becoming quieter earlier in the evenings. However, city centre pubs are continuing to perform well, although many have had to introduce or improve their food offer in order to supplement falling wet sales. This in turn has seen pubs compete increasingly with traditional restaurants, and ultimately a merging of the gastro pub and restaurant models. Banks are generally keen to fund well located properties that can evidence a strong pattern of trade as a going concern, but lending levels reduce when looking at regional or rural businesses, where the value of the bricks and mortar becomes the benchmark for loan to value ratios.
Whether you are looking to purchase your first pub, bar or gastro pub, or are an experienced owner operator looking to develop your portfolio, our expert team have a wealth of specialist knowledge in the pub sector across each region and vast experience of the buying and selling process.
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