Leased pub sales 'decimated'
Sales of leased pubs have been "decimated" over the past year, while pubco disposals dominate the market — that's according to property agent Fleurets' annual pricing survey.
Fleurets said 70% of its business is now selling freeholds for pubcos, compared to previous years when 50% of all transactions were selling leases.
Chairman Barry Gillham said: "It would be fair to say that the leasehold market has been decimated over the last 12 months, resulting in fewer assignments, and those that have sold are achieving prices of around 50% of those that pertained for the past 15 years."
Leasehold prices have fallen from £85,000 (26% of turnover) to £48,500 (13% of turnover) in the last year.
Gillham said the combination of bad press, falling profit margins and "grindingly slow" assignment processes were to blame for the leasehold market's decline.
Most leased pubs are now available priced around £25,000 to £60,000 based on turnovers generally above £300,000.
Meanwhile, Fleurets has sold 194 bottom end pubs — these are freehold pubs sold without accounts — in the past year, and has 675 currently available — most are on sale through the Manchester office.
The average price nationwide has fallen by 36% over two years (to 1.35 x potential turnover), to £206,446. However, statistics taken from the north show many pubs there are selling for £100,000 "a level not seen from more than 10 years". But Gillham said owners had allowed many of these sites to become "not only closed, but vandalised". He warned that "prompt and effective sales action needs to be taken" to preserve the value of disposal sites.
The average freehold price is up 3.6% on 2008 at £556,000 — Gillham says this is due to a statistical anomaly, and overall these have fallen 20% on 2007 values. Freehold properties are selling on multiples of 1.43 x turnover, down from 1.97 in 2008.
Those freeholds sold have turnovers of around £390,000. But Fleurets figures show a large number of freehold sites available at "virtually identical prices and multiples, indicating that they will eventually sell at lower prices and multiples".
Owners of successful freehouses have chosen not to sell in the current market, which Gillham says is due to them continuing to trade above average, and being "capable of holding their own" until market recovery.
'Not a complete disaster'
"It's not a total disaster when you look back over the five-year period. We've also been really surprised by the amount of cash out there, especially considering banks aren't lending," said Gillham.
"Most buyers have at least 50% of the purchase price, and a lot are buying without any lending at all."
The figures show sales were slow in the first half of the year, but up 50% in the second half. "To begin with people were in disbelief [over low prices], and standing back in horror. But as they adjusted to a lower plateau, it was business as usual."
He also said of freehold pubs sold, 58% were kept trading as pubs, with almost 40% going for change of use.
As for next year, Gillham predicted the market would continue to be dominated by pubco disposals, but didn't specify a number, saying it would depend on how many sites pubcos chose to release from the bottom end of their estate.
