Christie & Co’s Pubs & Restaurants Mid-Year Review found pub market activity improved in the first half of 2024, compared to subdued levels last year.
It also outlined the demand for lower price assets remained strong with more than 50% of activity happening within the sub £600,000 market while there were also signs the mid-market is returning as demand for premium assets has eased with fewer buyers in the market.
According to the report, the sub £600,000 market remains strong but the freehold, freehouse market is returning as confidence improves.
Within the restaurant sector, there has been a particular increase in demand for closed sites with buyers preferring to buy the property and add value in the current environment.
Notable activity
Christie & Co Pub & Restaurants Mid-Year Review report key M&A activity:
The most active buyers have been largely experienced operators or individuals already in the marketplace who understand value.
There has been notable activity from pub companies, which the report said were looking to dispose of sites that no longer fit their portfolios and as a result, freeing up capital for acquisitions.
Furthermore, operators are focusing on creating lean, consolidated businesses rather than on saturating the market.
The late-night sector has continued to struggle, the report highlighted CGA data that revealed five venues were closing a week in the first three months of this year.
Changing social trends, the growth of the late-night bar and the disproportionate impact of the cost-of-living crisis on the student and younger demographic has contributed to this while entertainment-led venues were faring better, according to Christie.
Sector challenges
Looking ahead, while operators are still facing many challenges such as staffing issues, cost pressures and current interest rates making borrowing challenging,
There will be a rise in M&A activity, the report predicted with tenanted pub companies continuing to be acquisitive while managed buyers will remain albeit cautiously.
It also stated there should be a rationalisation of estates as well as the easing of cost pressures.
Positively, a base rate cut later in the year should ease some pressure on household disposable income and open up the market as the cost of finance reduces, according to the report.
Pubs & restaurants managing director Stephen Owens said: “The first half of 2024 has seen the forward momentum continue from the end of last year.
“What the sector now requires in order to ensure the recovery continues is stability, the new Government to keep its pledge to help the hospitality sector particularly around business rate reform, interest rates starting to ease, improved consumer confidence and hopefully for the sun to come out and play its part.”