Pub property market remains fragile

Pub property prices stabilised in 2010, but the market remains fragile, according to leading property agent Christie+Co.

The agent's head of pubs, Neil Morgan, predicted — in Christie+Co's Business Outlook report on the pub property market in 2010 — that 4,000 low-end tenanted pubs would close over the next three to four years.

The report, which uses price information from pub transactions brokered by the firm, says pub property prices dropped by just 0.9% in 2010. This compares to a 20.1% decline in 2009.

The firm put this down to buyers returning to the market to make selective acquisitions, the tentative economic recovery and an increase in transactions. Over the year, Christie+Co saw a steady increase of 41% in pub sales, compared to 2009.

Private equity​

Sales of freeholds pubs currently run as managed sites were the most popular to buy among existing operators, private equity groups and "cash-rich individuals looking to gain a foothold".

Morgan predicted that as low-end tenanted pubs continue to struggle, 4,000 sites would be lost, as pubcos dispose of more sites.

He said: "Recent evidence suggests that more than 60% of these sites will remain as pubs, pushing the size of the traditional freehouse market, which currently stands at around 17,700 units, beyond 20,000.

"These disposals, over the next three to four years, will provide individuals with affordable opportunities to acquire and operate their own pub businesses and help to stabilise the industry."

Banks​

Morgan added that the banks will play an important role in 2011 by "determining how many of the distressed assets that they control should be released for sale".

"We believe pub prices have reached the bottom of the curve and stock released by banks and national pub companies will continue to meet demand from regional groups, local entrepreneurs and experienced operators who are looking for afford-able opportunities."

Christie+Co 2011 predictions​

• Further disposals from the pubcos

• The managed house sector will continue to lead the recovery in terms of both trading performance and transactional activity

• Competition for managed sites will remain strong and existing managed house operators will lead these acquisitions

• Private equity groups will continue to make a sector comeback

• Further growth in the expanding microbreweries sector

• Consolidation of assets and further estate rationalisation by banks

• Further distress cases as pubs lose the endurance battle