Pub property market ‘remarkably resilient’ in 2017- Fleurets

11/01/2018 - 11:13
A new Fleurets report into the price of pub properties has concluded that the market performed resiliently in 2017 despite the year’s economical and political uncertainties.

The average freehold sale price, combining both high and bottom end pubs, was £416,624, a 14.6% increase on 2016.

The price of better quality freehold pubs jumped by 24% in the south to £876,614 and by 12% in the north to £359,700.

While prices were up in both ends of the country, sales volumes were down, including “significantly” in the north.

Fleurets director, Simon Hall, said: “Despite the leap in the volume of transactions in H2 2016 potentially signalling a new dawn of a more active and fluid market, 2017 saw a 24% drop in the number of freehold freehouse transactions.

“This was perhaps a reaction to the uncertainty over Brexit.

“We saw a higher proportion of high value deals, with 20% of sales in the South being over £1m, led by central London and Bristol.”

Sales of bottom end freeholds increased in both average price and in volume during the year. Prices were up 24.5% nationwide while the regularity of sales increased at a similar rate of 22%.

“Strong demand and limited supply has led to a significant increase in sale prices, in both the North and South. Buyers for pub use and development are mainly small scale or individual but are limited by available cash resources," said Hall.

“Invariably for this type of asset a 50% cash stake is required before any additional funds for development or improvement are taken into account. This focuses demand on low value property that can be improved to add value.”

The average price of leasehold pubs was up across the UK by 31% with the number of sales increasing by 24% on 2016. Volumes were up 30% in the north.

The report highlighted a number of big portfolio transactions which occurred during the year including Heineken and Patron Capital's purchase of the Punch Taverns’ estate and C&C’s acquisition of Admiral Taverns.

"These transactions showed great confidence in the continued viability of the traditional pub and the tenanted pub model, especially coming at a time when the effect of the MRO legislation is yet to be fully appreciated,” said Hall.

“Increasing supply costs, the rates burden, National Living Wage increases and rising utility costs have put great pressure on managed operations over recent years, and as a result we saw sizable disposals in late 2016 and 2017 from a few managed house operators.

“These were a mix of package transactions and individual sales from Greene King, JD Wetherspoon and most recently a package from Mitchells & Butlers, which sold to a new entrant into the operational market, Milton Inns & Taverns."

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