Further lockdowns unlikely because Government ‘cannot afford it’

The sector is in a better place now, Hansen said. “We have all benefited from Government spending. With the Government’s money, the sector has been on life support. It has pumped a ton of money into the system, but government largesse is about to end.”

On a more positive note, Hansen said the pub trade is back on the expansion trail and this is likely to continue. He believes there will be more buyers than last year, and good prices will be paid for quality assets. According to Hansen, this is being driven by large real estate investors and private equity funds that have been impressed by the resilience of the sector in the face of the pandemic.

Customers desperate to return to pubs

He said: “Every time the industry is shut down, it bounces back when it reopens. Customers are desperate to get back to the pub and are tired of staying at home. This has not gone unnoticed by real estate investors, who are looking for resilient assets, especially freeholds.”

Hansen added this interest has been welcomed by pub companies, many of which need cash to expand after Covid damaged cash reserves. This has slowed expansion in the sector so many companies need the cash to grow.

Hansen said one might expect the prices of pub assets to decline because sellers are desperate but the opposite was true last year. “One of the things we learned in the global financial crisis is that prices don’t decline but the quality goes up,” he explained. “Buyers can be choosier but sellers will not accept discounts, preferring to hold out until markets improve. In the end, prices increase because the best companies sell, such as The Coaching Inn Group, Urban Pubs & Bars, Punch and The Inn Collection Group. 

End to travel restrictions

One encouraging piece of news is the ending of the travel restrictions and the threat of a lockdown. Hansen said: “The Government cannot afford another lockdown because of the cost of the furlough scheme. That is good news.”  Also, with the lifting of the rules on testing and quarantine, travel should return to normal reasonably quickly.

Hansen is optimistic about the market this year: “Sector interest was strong last year and we expect this to continue since both debt and equity are readily available. Real estate investors and private equity are sanguine about Covid disruption, with the attitude that ‘this too shall pass’. Investors are focused on a five-year time horizon and believe that the pub industry is resilient.”