Pubs being sold for alternative use on the decline

By Liam Coleman contact

- Last updated on GMT

Triumph: the Sir Richard Steele, north London, was one pub that was saved from developers in 2016
Triumph: the Sir Richard Steele, north London, was one pub that was saved from developers in 2016

Related tags: Landlord, Sales

The percentage of pubs that are sold for non-pub use decreased by 25% in 2016, according to the annual Fleurets survey of pub prices.

Figures show the percentage of pubs sold for alternative use – meaning conversion to residential, restaurant or retail premises – decreased from 50% of all sales in 2015 to 37.6% in 2016, a reduction of almost a quarter.

Conversely, pubs remaining as pubs increased from 50% to 62.4%. "The volume of pubs that were transacted reduced and, with that, the quality has gone up. With more viable operations being sold, they are likely to stay as pubs," Simon Hall of Fleurets told The Morning Advertiser​ of the findings.

A tale of two types of freehold

The report shows that freehold freehouses had a big boost in sales in 2016, with Fleurets reporting a 150% boost in sales.

Sales of freehouses were particularly buoyant in the north, with the report saying that the sale price in the north was up 18% in 2016, compared to an increase in the south of just 3%. "[This] reflects the improved quality of properties sold [in the north] with fair maintainable trade up 20%," Fleurets said.

The freehold freehouse market, which is defined by Fleurets as "pubs sold with the benefit of accounts with an unrestricted marketing period", had experienced low growth since 2008, but with memories of the recession fading, the market had a buoyant year in 2016, according to the report.

Last year was, meanwhile, a slow year for sales of bottom-end freehold pub sales – pubs that are generally sold without accounts or under temporary tenancy – in part due to a lack of disposals from the major pubcos.

Fleurets said in the report: "The bottom-end sector has been dominated by the big six tenanted pubcos since the recession in 2008, up until mid 2015. Since then, the pressure to sell has abated and disposals now trickle through based on normal estate management decisions."

MRO uncertainty affecting leaseholds

On leasehold pubs, Hall said that this sector of the market was slow in 2016 because of uncertainty around the pubs code.

"In respect of tied pubs, the market-rent-only (MRO) option has had some effect. Buyers and sellers are uncertain about the prospects of a sale, and agents have little evidence of post-pubs code assignments on which to base their advice," he said of the figures that showed leasehold sales had decreased by 20% over 2016.

Ultimately though, Hall had confidence in the pub market going into 2017. "The pub industry is on a good footing, as supported by the [proposed] Heineken deal, but it's not impervious to world economies. If Brexit and 'Trump-mania' hit the world economy in a big way then it is going to affect everything – not just our market. That aside, we anticipate continued on-sales performance and continued demand for property," he said.

  • The full report can be viewed online here​ and there will be more analysis and exclusive insight in the 16 January print edition of The Morning Advertiser.

Related topics: Property law

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