What's the use?

There is no escaping the fact that there are a growing number of pubs being converted to alternative use. There are however a lot of misconceptions about the types of property involved and the uses that apply. I have considered a substantial number of sales for alternative use we have dealt with over the course of the last 12 months and have summarised my findings below.

In most cases sales for alternative use are in respect of bottom end pubs that are invariably closed and can be picked up by developers and local individuals at very low prices.

The end use isn't simply about residential development; there are many other uses that pubs get sold for including: restaurant, retail, offices, and care homes. In fact, within the last six months, sales for residential development have reduced considerably - something that I'm sure reflects the general state of the housing market.

A common misconception is that these sites are 'operating pubs' being sold for a much higher price eg a "golden brick" sites, where as, in reality, they are often closed and boarded properties that have reached the end of their economic life as a pub.

It is much more of a rarity that sales for alternative use are golden brick sites that get sold for big money, and in almost all of these cases, it only happens when there is additional land - e.g. a large car park or large beer garden circa and are a minimum of 0.5 to two acres in size.

Contrary to popular opinion, many of the corporate disposals that we deal with are NOT selling for alternate use and are, in fact, selling to smaller local or regional Pubcos and private operators who may have a better understanding of the local area and its needs, or indeed can apply cost savings to make the proposition a viable one. Alternative use opportunities are important to consider but they are not the be all and end all for the majority of operational pubs where the market is still active.

One of the problems with selling for alternative use, particularly for higher value sales, is that sales are often conditional on planning. If a site has any uncertainty in respect of planning, this can make a significant difference and delay sales for a considerable time.

As a guide, consider this: if the pub is open and viable, then in most cases it will not have any significant higher alternative use value and will probably be best sold as a going concern. However, if it is a closed and boarded unit that is passed its 'best before' date as a pub, it will probably attract a higher value for a different use.

As with any generalised rule, there are exceptions, particularly in respect of large sites; town centre or main road sites where higher value can be achieved for different uses. But be aware that in most cases, and as mentioned before, this higher value can be tied up with offers subject to planning permission.

If you think you have a pub that has alternative use potential, consider these factors and most importantly, take proper advice from a suitable and specialised agent that has a professional approach, preferably Chartered Surveyors, and ensure they have the systems to be able to market the opportunity to all comers.

On a final note, beware. Too many rogue firms see the pub market as a 'soft touch' and will offer poor advice based on securing an upfront fee and a long contract that is difficult to exit. Seek comparable data from agents and ask about other pubs they have sold in the area - there's nothing better than a testimonial from a local licensee.

Top Tips:

Consider whether your pub would be better performing another function within the community.

Do you have surplus land, are you on a main road, in a city centre or other high value area, in which case you might have a higher alternative use value.

Does the pub trade well? If so, it's unlikely that you'll achieve greater alternate use value.

Ask yourself, could another operator make this pub work?

Make enquiries about planning permission - you may be chasing a lost cause.

If the price an agent tells you your pub is worth seems high, it probably is. Beware of agents looking to secure your instruction based on an unrealistic asking price.