Pub prices up again in 2007 - Christie's

Pub property prices rose by 8.5% on average last year, and should achieve a similar lift in 2007, says property specialist Christie+Co.

The company's head of pubs Colin Wellstead said: "The industry has come through the past year's licensing challenges with flying colours. Last Friday's interest-rate rise will not affect prices. As long as rates remain stable for the rest of the year, we predict that the industry as a whole will adapt well generally to the challenges it faces during 2007."

The trade saw £2.9bn worth of deals being struck last year. "With investor interest in all our sectors showing no signs of waning, and particularly amongst private equity players, we predict another active and successful year," said Wellstead.

"And probably at least one major pubco will go down the REITS route this year."

Industry rumours suggest the first will be a major tenanted/leased group.

Listings on the AIM stock market are likely to be few and far between, according to Wellstead, with private deals the more popular route. The exception may be Capital Pub Company, which has stated its intention to seek a listing.

At least one more family brewer is likely to be taken over this year, says Christie.

Freeholds continue to be fought over by pub companies, brewers and private individuals, which has driven further price rises. However, "the quantity and quality of freehold units coming onto the market is starting to deteriorate as the best freehouses enter pub group ownership".

Christie adds that the high-street circuit is still the toughest, with quietest deal activity.

It predicts the late-night sector will be challenged by the smoking ban: "We foresee the further closure of many traditional nightclubs, and their replacement by chameleon-type bars offering extended opening hours."

The company claims that last year's move to seek premiums for high-quality new lease opportunities, such as those provided by Punch Taverns conversion of Spirit pubs, "has had a dramatic effect on the new lettings market. The many deals secured during 2006 proved licensees are more than willing to pay a premium for exceptional business opportunities."

Christie+Co predictions

l Prices to rise by 8.5% in 2007

l Pubco to become a REIT

l One more family brewer to close

l Nightclubs and circuit bars will remain under pressure