Private equity investors will continue to seek pub portfolios in 2020

17-Jan-2020 - Last updated on 17-Jan-2020 at 16:09 GMT

Sector strength: Christie & Co’s Stephen Owens believes purchasing activities will continue in 2020

Specialist business property adviser Christie & Co has predicted private investors will continue to seek tenanted, managed and franchised pub portfolios alongside consolidation opportunities in the next 12 months.

According to Christie & Co’s Business Outlook 2020: Focus on Business report, the UK pub sector finds itself in an “incredibly strong position” off the back of more than £8bn worth of portfolio transactions in 2019 – surpassing the level of activity seen over the past decade.

However, Stephen Owens, managing director of pubs and restaurants at Christie & Co, doesn’t expect to see a drop off in sector wheeling and dealing this year.

“We witnessed a considerable amount of M&A activity in the pub sector throughout 2019, which we fully expect to continue going into 2020,” he explained.

“We now have a leaner, healthier and better-invested sector that appeals to a broad range of investors who are attracted by the prospect of significant returns and additional security that the underlying pub assets represent.”

Sector churn

According to Business Outlook 2020, the continued churn of large tenanted estates – with the likes of Marston’s and Star Pubs & Bars offloading what they see as tail-end pubs – has created a healthy supply of pubs on the market, while private equity-backed operators and investors have driven demand.

As reported by The Morning Advertiser (MA), there have been more than 180 mergers and acquisitions in the UK pub sector since the start of 2018.

In November, MA revealed that Admiral Taverns had purchased 137 pubs from Marston’s in an “exciting acquisition” worth £44.9m after picking up a 150-pub package from Star Pubs & Bars a month earlier.

Check out MA’s recap of the biggest pub sector deals in 2019 here.

Family pubco growth

Alongside forecasts that M&A activity within the sector will continue, Christie & Co also predicts that traditional, family-owned, pub companies and brewers will expand at a steady pace while disposing of tail-end pubs.

What’s more, the property expert’s report suggests that demand for properties with letting rooms will continue to attract the most demand as a more diverse source of income and a more mature entry point for investors, according to Christie & Co.