Demand for freeholds from both pub companies and individual operators drove freehold values up by 9.2 per cent in 2004, says property agent Christie & Co.
Launching its Business Review 2004 & Outlook Report 2005 today, the agent said that demand for pubs across the UK is continuing to exceed supply. Leasehold pubs became increasingly popular due to the shortage of freeholds and the lower cost of entry to the market for first time buyers.
Increases in interest rates and signs of a slowdown in the residential housing market had very little impact on buyers who continued to pay high prices for pubs, the agent argues. It says that developers are still paying big money for pubs that can be converted for alternative use or used for new developments.
David Rugg, chairman of Christie & Co, said: "The economy continued to provide a positive environment for businesses with low inflation, near full employment and relatively low interest rates. When businesses are trading well, there is little incentive to sell - hence the shortage of properties on the market."
The agent argued that the market remained buoyant despite the residential market slowing down. Buyers were encouraged to trade in their homes to acquire small businesses. Even this decline did little to "discourage buyers, who are still able to buy good-value businesses by investing capital from their homes", the report states.
The agent says pub operators are still struggling with the strong competition and high rents on the high street. It says that issues such as binge-drinking, selling drink to under-age customers, happy hours and drink-fuelled violence have all put a strain on the industry over the past year. The report adds that the upcoming smoking ban in public places, the issue of the beer tie and the introduction of the Licensing Act are likely to be bigger issues in 2005.
Predictions for 2005
- Further consolidation on the high street
- Increasing number of property players in the market
- Continuing shortage of freehold properties for sale
- Trend towards leasehold pub sales to continue, up from 40 per cent of Christie & Co sales in 2004 to nearer 50 per cent
- Smoking ban will bring changes to the market, as publicans seek ways to circumvent the rules by separating food sections from drinking areas
- Pub companies and brewers remain active buyers of pubs
- Pub trade will have to tackle critical issues such as binge-drinking
- New licensing regime could cause backlog and increased
- bureaucracy.
Pictured: The Seagull House in Boscombe, Dorset, attracted 15 bids between £1.4m and over £2m. It was eventually sold for five times its value as a pub, achieving the highest price ever for an Enterprise Inns pub.