Average leasehold prices increase by 3% but freehold prices decline

However, the average sale price of freehold freehouses declined 12%, according to the latest survey of pub prices by leading property firm Fleurets.

The survey found that the average sale price of bottom-end freehold pubs stood at £217,403 (2012: £217,232) during the year, with prices in the north falling 1.5% to £171.4k, but increasing 2.8% in the south to £284.9K.

The average sale price in London fell from £386k to £360k. Multiple of FMT was down in both the north and south.

Average leasehold prices climb​

The average sale price of leasehold pubs climbed from £39.7 to £41.2k during the year, with prices in the north increasing by 59% north to £33.8k offsetting a decline in the south of 11% to £46.3k.

Prices in London fell from £83.8k to £70.1k. The average sale price of freehold freehouses fell from £639.8k to £582.6k, with pub prices in the north down 24% to £431.5k, while those in the south increased 2% to £684.8k, although this was exaggerated by a number of high value sales for alternative use in the London.

Bottom end activity​

Simon Hall, director & head of pubs at Fleurets, said: “Last year the public house property sector involved many of the same dominant market forces as the previous four years. At the bottom end a continued strong supply of pubco sales from the big six tenanted pub operators was supplemented by an increase in administration sales.

“Finance continued to be restricted and economic uncertainty was the underlying trend. However, as the rationalisation of the pubco estates entered its fifth year, residential values were increasing in some areas and with improved like for like sales figures being published by several multiple operators, there were signs that things could be starting to change.”

Fleurets said it saw a 38% increase in the total number of pub transactions during the years, with total transaction value up 61% to £148m.

Bottom end freeholds​

Hall said: “The type of bottom end freehold transaction, i.e. without accounts and invariably sold in a forced sale situation, has continued to dominate market activity. The overall volume of sales was up 33% nationally. Bottom End Pub sales accounted for 64% of all public house transactions, 60% of which were undertaken in the north (58%).

“The average sale price has been maintained from last year at £217,403 with only small variations in the north at -1.5% and the south at +2.8%. This overview, however, tends to hide the variations across the regions, where different market activity has resulted in different end results, for different reasons.

"For example in the north west the average sale price dropped 15% as several pubcos and regional brewers sold off some of the worst bottom end pubs, that had not sold in previous years, thereby bringing down the average sale price. Whereas in the north an increase of 18% in the average sale price resulted from a small number of higher value sites being sold out of administration combined with fewer of the worst bottom end sales.

“In the south there was a decrease in the average sale price in London and East Anglia regions as the average quality of properties being sold reduced, whereas a 10% increase in the west resulted from the three highest value sales being for alternative use.

"The south had an increase in average sale price, largely as a result of higher quality pubs being sold. “Overall we have seen a polarisation in the quality of bottom end pubs being sold, with some ‘deadwood’ being sold to clear the decks for the year ahead and better quality bottom end pubs coming to the market, including both viable pub operations and alternative use opportunities.”

Alternative use​

The survey found that the number of pubs being sold out of the trade continues at much the same rate as it has for the last four years, with 50% of Bottom End Freehold pubs being sold for alternative use compared to 48% last year, 54% in 2011 and 50% in 2010.

Hall said: “This compares with 74% of freehouse operations being sold for continued pub use. The most common alternative use is residential conversion/development at 58% of pubs sold out of the trade. Buyers of these properties have largely been individuals but there are a number of sites being sold to regional brewers and regional/local multiples.”

Hall said that the company anticipates that many of the tenanted pub companies are nearing the end of their mass sales programme.