Change is always tough but we should be confident of the post-ban future, says Barry Gillham
Everywhere I go at present I am asked, "How is the licensed property market holding up in the light of the impending smoking ban?"
I have to say that my fears of a lull caused by people holding back during a period of uncertainty have proved unfounded. I have worked through major changes brought about by the introduction of the breathalyser, VAT and decimal currency. The breathalyser had the strongest impact, and it became impossible to sell rural pubs for about a year. But life went on - some pubs closed, while others adapted and are now largely restaurants.
I have worked through major changes brought about by the introduction of the breathalyser, VAT and decimal currency
Once new patterns of business emerged, banks and their valuers could reasonably predict future profit-flows and hence the ability to service loans. Profits, and the availability and cost of finance always drives price.
Change is always resisted by some: older licensees retired rather than buy new tills or attempt to understand new-fangled decimal currency. Others thought Britain had become a Stalinist state when they had to report to Customs & Excise as well as the Inland Revenue. Fleurets experienced an above-average number of sales instructions (then known as tenancy changes) on each of these major changes, and the same still seems to hold true.
We have more pubs on our books than we had last year, but have also sold more in the last six months than in the same period last year.
Prices of freeholds and food-led leaseholds have held up well: I notice no discernable fall. But the bulk of the extra instructions are for "urban boozers", which are difficult to sell if loan funds are required. People seem to be factoring-in costs of adapting outside areas and cleaning up internal areas to eliminate smoky smells, as well as an expected drop in trade.
These urban pubs need to be priced appropriately if they are to sell - the danger is that people who have decided to sell will do nothing to adapt their businesses to the new regime. If they don't manage to sell they will be left between a rock and a hard place.
The exception to the generally good feeling in the market has been south Wales, where the market has been difficult since September.
Now that the Welsh smoking ban is in force, we expect to see sales taking place - perhaps at lower prices - once the first few months' trade can prove future levels of profitability.
The market is driven by the banks - if they decide that the licensed trade is a "no-go area", deals simply come to a halt. But again Fleurets statistics show that we have done more bank valuations in the past six months than in the equivalent period last year.
Clearly, the banks have confidence in the future, but one point does come to mind: Fleurets is not the cheapest provider of bank valuations. We tend to receive more complicated or higher-value instructions. Perhaps the banks are giving us more instructions on the basis that they have the security of a better-informed valuation in return for a slightly higher fee.
Or perhaps that's just my vanity showing...
Barry Gillham is chairman of Fleurets