Property market heading for a fall, warns agent

Chesterton, the property agent, is advising people to sell their pub and restaurant sites while the property market remains strong.

In a keynote report called Whither the A3? Chesterton argues that while people investing in pub and restaurant sites - known as "A3 sites" - have reaped the rewards of the recent spiralling property prices, it believes the current high prices are unsustainable.

Chesterton forecasts that over the next two to three years there will be a market shake out that will see a rental downturn in pubs and restaurants.

The group says that the social changes in the market, such as all-day drinking and the European café culture, have seen a boost in the market.

However, problems on the high street, which have seen operators such as Brannigans and Old Monk go to the wall, is sending the market into slowdown.

It says that occupiers and lessees must consider their long-term trading performance against rent and outgoings.

The agent claims that the best strategy may be for lessees to consider striking an arrangement with a landlord to either restructure the lease or agree a lower rental.

Chesterton feels the property market is heading for a fall, and that things are "not rosy in the beer garden from the operators' point of view".

Robert Chess (pictured)​, head of leisure at Chesterton, said: "We are convinced that some areas of the A3 market will suffer over the next few years, we have made firm recommendations to both A3 operators and investors.

"Operators need to cast a critical eye over the likely future trading performance of every unit they occupy, ruthlessly weeding out those they do not believe will deliver an acceptable return.

"This may include paying back landlords to take back leases if necessary.

"We advise operators to re-evaluate every property in their portfolios.

"If there are likely trading problems, if the location is slightly off-pitch or if there is the slightest doubt about any tenant's covenant, we advise that selling up be seriously considered."

Chesterton's report is supported by property consultant Colliers CRE, which claimed in June that the pub property sector is to be dominated by the buying and selling of high street sites over the next year.

Ian Garrood, director of Christie & Co, said last week there is still plenty of activity on the high street leasehold market.

He says that contrary to reports about the doom and gloom on the high street, which have come from the spate of recent company profit warnings and brand failures, the market is buoyant.

He argues that there are still buyers in the market for well-located A3 units in town centres and premiums are still being paid for good sites.

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Related articles:​

Christie & Co reports buoyant high street sales (2 September 2003)

Upward rent reviews on the high street unlikely, says new report (26 June 2003)