Pub property: out of the woods?

Is the recession in the pub property market over? Agents have signalled that the worst may be behind us — pointing to sales increases of between 12% and 150% in the first quarter of 2010 compared to the same period last year.

Morning Advertiser​ spoke to six agents who reported confidence returning to the market, as cash buyers decide the time is right to invest. And leasehold sales are finally on the up too, as better terms and the continued absence of bank funding make them more attractive and more attainable than freeholds.

Neil Morgan, head of pubs at Christie+Co, said: "We have seen a 12% rise in completed deals since the start of the year compared to the same period in 2009, with the number of viewings and viewers also rising 9% and 16% respectively year on year."

And business is, if not booming, then at least picking up significantly in March. Fleurets director Simon Hall said the first quarter had been "particularly busy, especially March".

But according to Hall, Fleurets sales are still predominantly "lower-end freehold sites".

"The new stock that came on in March — especially the 43 Scottish & Newcastle pubs — has had tremendous interest. We've got 20 viewings in the first week and 10% are already under offer."

But Hall also said leasehold sales were growing. "With fewer freehold pubs around, people keen to get into the market are looking at leases.

"And with better deals on leases available than ever before, there are real opportunities now."

Stephen Taylor, managing director of Guy Simmonds, reported a 30% sales rise at his firm. "It's been the best quarter for three years — especially March," said Taylor. "Things are very buoyant."

Taylor said leasehold buyers can now get "cracking returns" — realistic prices and more cautious valuation criteria mean they get their money back on their investment within one to two years. Taylor also said many current buyers had been made redundant and were proving shrewd cash purchasers. Three new valuers have been hired to cope with the increased workload.

Scarcity of freeholds​

Hall said signs of improvement in the lease assignment market were mainly in the south-east because fewer freeholds are available there. Pubco disposals dominate the north, north-west and Midlands.

This held true for London agency Davis Coffer Lyons (DCL). "We've had a couple of cracking leasehold sales, but freeholds are still quite scarce in London, although there are a lot of off-market deals," said head of pubs Paul Tallentyre.

He said leasehold sales, especially free-of-tie sites, were proving popular as "banks still aren't lending substantial funds".

"Putting down a deposit of 25% to 30% makes a freehold very expensive, especially if it needs a refit once the sale is completed."

Tallentyre said DCL's sales so far in 2010 were 43% higher than the same period last year.

He attributed some of the pick up to cash buyers coming back into the market place, "after being scared off by media reports of a 'double dip' in the economy".

"A lot were also waiting for politicians to act in the sector. I'd say that's still holding things up a bit."

Caution over values​

Looking forward, GA-Select managing director Graham Allman is "very confident" as first quarter completions are up 150% on the "dire" first three months of last year.

He said leaseholds were now selling at the same level as during the market's peak. However, the freehold market was "a bit like walking in treacle", considering "valuations are about 25% lower than sellers' expectations".

Robin Mence, managing director of Sidney Phillips, sounded a note of caution over the still-low prices overall: "I see no sign of values increasing at all."

But he added: "Transactions are at least double on the same period last year — although they were at a historic low then."