Scottish freeholds still in demand

Like their counterparts south of the border, Scottish pubs have had their fair share of troubles over the past couple of years. The smoking ban, the Licensing Act and now the Budget are all putting margins under strain.

Some pubs in the leasehold sector, in particular, are floundering. And it's not unusual to see once-thriving sites lying moribund, sometimes for a year or more.

So given the trade's prevailing doom and gloom, it's maybe surprising to find property agents in such ebullient mood: they argue it doesn't matter whether it's in Glasgow or the rural West Highlands - if it's a freehold with good figures it's going to be in hot demand.

One Glasgow chartered surveyor says: "Food is the one ingredient which can help a business sustain custom throughout the trading day, whereas with wet-led bars much of the turnover inevitably depends on late-week and weekend visits."

Many pubs have developed serious food offers, sometimes amounting to actual restaurants, to counter the loss of regular trade following the two-year-old smoking ban. And Scotland is now starting to see the first batch of upgraded food bars realising their recently won higher values.

Derek Burgoyne of Edinburgh-based agent Bruce & Co says "business is definitely buoyant".

His firm has just sold Crofters Bar, "a stylish bar-restaurant with sea views" in Rosemarkie, near Inverness - where it's reckoned to be ideally placed to benefit from 'destination venue' trade from the Highland capital.

But the location is a factor for the buyer too: close enough to a major conurbation offering reliable custom but "in the country" enough to offer quality of life.

Another factor said to be driving the trend towards 'just out of town' buys is the growing customer base of commuters looking for city-centre quality on their own doorstep. This is perhaps especially true of Edinburgh, where rocketing property prices have fuelled a steady drift out of town to places such as South Queensferry, Musselburgh and Burntisland.

On the tourist trail

The same logic applies in a different way at the Lord of the Isles, a large bar-restaurant at Craobh Haven, rural Argyll, sold recently through Christie + Co from an asking price of offers over £500,000.

It's 14 miles from the nearest substantial town but on a main tourist route to the Highlands. More importantly, however, it's in a coastal timeshare village serving a marina visited by many touring yachtsmen - thirsty and hungry yachtsmen - from all over the UK.

Pub licences and the flexibility they offer make them generally more popular buys than restaurants, but one example of a business which isn't allowed to become a pub is Inverness canalside venture the Caley Inn, being sold by Scottish & Newcastle Pub Enterprises (S&NPE).

The former bar will only be allowed to trade as a restaurant, under the sale agreement, so that it doesn't compete with other S&NPE pub ventures in the area.

According to Peter Darroch of agent Jones Lang LaSalle in Glasgow there's now definitely a split between freeholds and leases in lending terms. He says banks are much more reluctant to deal with leases unless they've a solid track record, while "the good city freehold" remains the licensed property Holy Grail.

Meanwhile in Edinburgh's busiest trading circuit in the historic Old Town, the Halfway House in Fleshmarket Close is on the market for offers over £500,000. It will more than likely be snapped up soon.

Bags of character, a rare freehold opportunity, guaranteed tourist as well as local business. It seems perfect, but you never can tell… And the pubco's point of view…

Lesley Welsh, tenancy director, Iona Pub Partnership (the tenanted arm of G1) ​

"This market is still buoyant, but with more and more pubs being bought up to become tenanted and the number of potential operators decreasing - mainly due to cashflow availability and perception of a struggling market this year - capturing these operators is the key.

"It will be the time for the smaller companies to thrive, as people are looking away from large pubcos where they are all treated in the same way, whatever type of business they run, to where they can get flexibility and a more hands-on type of support structure.

"We have seen this with a larger number of applicants coming through in the past six months, and commenting on what has attracted them to us.

"We can flex the agreement to suit their needs, plan a bespoke training package (at no extra cost) and of course we are a Scottish-based company, which always works to our advantage."