Building pub costs 'still below 2007'

The cost of building a new pub is still around 15% lower than the peak of 2007.

That is according to the Building Cost Information Service (BCIS), part of the Royal Institution of Chartered Surveyors.

It is good news for pub operators such as Marston's, Mitchells & Butlers and JD Wetherspoon all looking to develop new-build pubs.

The current cost of building a new pub is £1,800 per sq metre, based on a 900sq metre building including the substructure, superstructure, finishes, fittings and services. Costs peaked at £2,141 per sq metre at the end of 2007 but costs dropped nearly 20% at the beginning of 2010, with a low of £1,766 per sq metre.

Each quarter in 2009 saw double-digit decline, compared to 2008.

This started with a drop of 10.4%, 12.6% in the second and third quarters and fourth-quarter decline of 11.7%. The average price of building a pub in 2008 was £2,094 per sq metre, compared to £1,847 per sq metre in 2009. At the start of 2000, it was £1,384 per sq metre.

BCIS executive director Joe Martin put this down to "contractors competing for turnover in a declining market". But he thinks prices "will stabilise at around this level through most of 2011".

"Prices tend to be driven by overall demand for building work rather than demand in a sector or subsector," he said. "There are signs of recovery in commercial development, suggesting developers expect a recovery in two years, but Government cuts will impact on construction demand from the public sector."

Sources suggest companies with strong covenants such as JD Wetherspoon are negotiating landlord contribution to refurbs of up to £300,000 on leasehold sites.