The future pub market will be dominated by new super pubcos

By Neil Morgan

- Last updated on GMT

'We could see the closure or sale of pubs that don’t work as managed houses' [Credit: Flickr - davi]
'We could see the closure or sale of pubs that don’t work as managed houses' [Credit: Flickr - davi]

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In 10 years’ time we could see a market dominated by the largest international brewers, reducing customer choice, says Neil Morgan, director and national head of pubs at Christie + Co

We don’t need to look too far into the future to see quite a different prospect for our pubs. In recent years we have seen a large number sold which were poorly located, outdated, under-invested and faced too much competition, which has left us with an industry that is leaner, fitter and more sustainable.

But there is always change and I believe the next two years will be critical, potentially altering the face of the industry forever.

Let’s assume the market-rent-only option is implemented. Over 80% of the market becomes “free of tie”. So will tenants of smaller pubcos and family brewers call for the same “rights”?

We could see the closure or sale of pubs that don’t work as managed houses or are not suitable investments. We could witness the right pubs in the right locations being sold as landlords seek to maximise their return, resulting in some being sold for alternative use.

Christie + Co’s own evidence shows an increase in the private freehouse sector, with 80% of pubs sold staying as trading pubs. The next five years will see an increase in the current number of
multiple-operating pubcos (currently around 300).

But in the following five years we will witness consolidation of these multiple companies as new “super pub companies” emerge.

Free of tie leases are comparable to other non- licensed property investments where there is an arm’s length relationship between the landlord and tenant. Pubs will become more attractive investments resulting in lower yields.

In 10 years’ time, we may see a market where there is no vertical integration between pubs and brewers, with pubs and bars owned and operated by companies and individuals. The largest international brewers could end up dominating the
market, which may drive down prices but could also reduce customer choice.

For some, this may be less than a positive prospective. However, like those that have been in this industry for many years, the pub sector will adapt and survive, whatever challenges it may face.

Related topics: Property law

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4 comments

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missed it

Posted by Trade Stalwart,

Christies missed out (in their reasons for sale) the 1000's of over-rented pubs whose tenants are forced to sell unprofitable brands under a supply tie. Large numbers of "bed blocking" non-REO tied pubs who got access to decent sites and sharp elbowed decent operators out of the way during the recruitment process, now hold up trade recovery and being saddled down with all their debts from trading so badly they simply refuse to walk away and the pubcos have no powers to evict them, its woeful.

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Brewers owning pubs

Posted by Mike Terry,

The huge growth of independently owned freehouses which sell quality real and "craft" ales will continue in my view. Its great!

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Brewers owning pubs

Posted by Raymond Welton,

I think a part of the market you haven't recognised is the small brewery sector which is becoming empowered with the "local" "craft beer" revolution & who are begining to buy pubs. In 10 years this will be a substantial sector & the pubs will be popular with punters, simply because it's the beer they want to drink.
I think pubs are safe all the time there are people.

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