Rents on new pub leases fall, RICS Pub Benchmarking Survey reveals

By Michelle Perrett

- Last updated on GMT

Related tags: New leases, Leasehold estate, Renting, Public house, Rics

RICS Pub Benchmarking Survey results
The average annual pub rent for new leases in England and Wales dropped slightly to £26,920 during the last quarter of 2012, according to the new Royal Institution of Chartered Surveyors’ (RICS) Pub Benchmarking Survey.

The survey was produced as a response to the Business, Innovation & Skills Committee’s request for more transparency in terms of pub rental rates.

During the final three months of last year, data provided by three leading pub companies — Enterprise Inns, Punch Taverns and Marston’s  — showed average new rents fell by 2.6% from the previous quarter (£27,651).

The east of England reported the highest rental values, with the average pub lessee paying just over £33,500, followed closely by London at £32,730. Meanwhile, lessees in Wales reported the lowest values at almost £19,000.

As part of the report the three pubcos predicted that average annual pub turnover would hit almost £300,000 over the coming two years.
As a result, rental costs will represent around 9% as a percentage of turnover.

On a regional level, lessees in the east of England had the highest annual revenue, at almost £360,000 per year over the coming two years.

Ben Elder, RICS’ global director of valuation, said: “Rents accounted for 9% of pubs’ turnover at the end of last year — and this was fairly consistent throughout 2012.

“This stability is relatively encouraging, given the problems felt by the sector in recent years.

The launch of our survey is a significant step forward in providing badly-needed, transparent data to the pub industry.

“Our aim is to work in the public interest and provide expert, impartial advice to the industry on the impact of changes in the market.”
Fair Pint founder Simon Clarke welcomed the transparency on rents but said that he thought the information could be misleading.

“The more information that there is out there the better. But there is no indication of beer prices and gross profits.

“This could be a misleading tool if not used in the right way. Projections are meaningless. Pubcos don’t know the sales of their licensees, so they are guessing.

“An annual turnover of £300,000 is laughable. If beer volume sales are dropping how can they estimate the sales levels?

However, British Beer & Pub Association chief executive Brigid Simmonds said: ‘We welcome the increased transparency which this benchmarking survey represents.

“It is vital that would-be tenants and lessees have access to up-to-date benchmarking data on rents before taking on a tenancy or a lease.

“It is also encouraging that RICS have acknowledged the stability on rents at this challenging time for the sector.’

The RICS will be producing the survey quarterly and is requesting that other pub companies get involved by emailing economics@rics.org.

Star Pubs & Bars will provide the information for future surveys.

Other statistics​:

New leases: facts and figures
■ The average new lease length was seven years.
■ The average rent on new leases was £26,920 per annum.
■ The average projected turnover on new leases was £299,922pa over the coming two years.
■ Rents on new leases were 9% of projected turnover.
■ Some 68% of new leases are partially-tied, according to the survey.
■ 32% of new leases have a full tie.

Related topics: Property law

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