Opinion

What could 2019 hold for the pub property market?

By MA Editorial

- Last updated on GMT

What's yet to come? Industry experts give their predictions on the pub property market
What's yet to come? Industry experts give their predictions on the pub property market
The Morning Advertiser asked industry experts to forecast how the pub property market will shape up in 2019.

Tom Nichols, managing director, Everard Cole

“Challenging – a word often used to describe 2018, and with good reason.

“While many are bored to their back teeth with Brexit, this has been the significant factor in the overall slowdown of the property market as uncertainty has crept into many people consciousness. 

“The positives are that property has weathered the storm better than other asset classes, and income-producing, property-backed investments have soared in popularity throughout the year and we expect this yield strength to continue in 2019.

“We also expect the festive trading to be robust as people congregate and look forward to the year ahead. Staycations are likely to be more prevalent in 2019 boosting our local economies.  

“We expect values to remain generally static given the lack of supply and consistent levels of demand from willing buyers. 

“A real concern would be the tightening of the funding tap and increased lending restrictions, which would hamper growth in the wider economy. We do not expect the slowdown in the property market to worsen because the uncertainties are already present and priced into current values.

“We expect the continuation of regional value variations, having seen some strong performance throughout the year in our regional centres such as Cambridge, Bury St Edmunds and Milton Keynes as well as London, Birmingham and Norwich and expect to see continued value growth in these areas in 2019.

“Landlords are now starting to appreciate that there needs to be an adjustment of rents for the high street to flourish and coupled with the welcome news on the one third cut to business rates in the recent budget (for properties with a rateable value of £51,00 or less), expect to this to be the catalyst for new concepts in the casual-dining market taking advantage of the opportunities that exist.”

Simon Hall, director of agency, Fleurets

“When considering 2019 predictions for the pub and leisure property industry, one must first appreciate that it is difficult to generalise because there are so many sub sectors of the market that will experience different circumstances.

“We do, however, expect that there will be a continued decline in the number of smaller pubs, which are no longer viable as businesses. Although small operations which adapt to a wet-only niche trade, for example, craft ale bars and gin bars, are poised to thrive, benefiting from the reduction in overheads, and particularly wages.

“Medium-to-large operations will increase in smaller numbers. This trend will continue country-wide. Meanwhile, some regions have witnessed a strong appetite from independent operators seeking food-led pubs in destination locations and affluent market towns, which we anticipate will continue throughout 2019.

“With rental markets in many city centre locations over-heating, operators will move their focus to some of the smaller cities and larger regional towns in order to find value.”

Paul Davey, managing director, Davey Co

“The principal factor that, above all else, will influence the licensed property market in the year ahead is unquestionably the outcome of the Brexit debate.

“This will fundamentally determine the economic climate affecting everything from the lending policies of the banks, interest rates, employment issues, overall business confidence and consumer spending.

“This said, the licensed property market has held steady throughout 2018, particularly in the middle to top end of the spectrum, which is where Davey Co is most prevalent.

“Well-run, successful operations and sites in good demographic locations are, and will remain, in strong demand.

“The uncertainty of Brexit has led to a fair amount of breath holding, particularly among the larger corporate operators, whereas the independent sector of small, niche multiple site operators, such as the MA500 membership, and private owner operators has continued to grow strongly.

“We do not see this likely to change in the year ahead.

“As the old adage goes, the cream will always rise to the top and in a challenging trading environment strong, competent operators will be rewarded and poorly run businesses will suffer.

“Just as good operators keep a close eye on their offer, margins and costs, we too – as competent agents – keep a close eye on market sentiment and conditions thereby ensuring the right advice is given to those considering a sale, and that is vital to ensuring a successful outcome.”

Kevin Marsh, head of licensed leisure, Savills

“Last year was a particularly successful one for the pub industry.

“The hot summer and the World Cup meant that there was a real boost to mid-year trading performance, which will be difficult to recreate next year.

“Next year, there will be selective disposals and acquisitions within the corporate pub market as a reaction to specific trading conditions, and fewer large portfolio disposals.

“Potentially there will be more mergers of independent pub companies where shareholders and investors are looking to exit.

“We might see some more free-of-tie lettings coming out of the corporate and investment sales in order to maximise the price while also seeing ground rent sale and leasebacks.

“More deals will have to be arranged conditional on planning permission with fewer unconditional sales of pubs to developers.

“One key trend will be that price is based on actual trading performance and less emphasis on trading potential.”

To find out more about pubs for sale, lease and tenancy visit our property site​.

Related topics: Property law

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