JDW asks for 30% drop in freehold prices

JD Wetherspoon (JDW) has been asking vendors of freehold property to drop their prices by up to 30%.

The company says it is looking for a "meaningful correction" on prices, following a significant fall in commercial property values.

The move is a dramatic example of the weak state of the commercial property market, with buyers able to flex their muscles when dealing with vendors who are very keen to sell.

The company has instructed its sub-agents, who negotiate with vendors, to adopt a more aggressive strategy designed to net new properties at more realistic rates.

The pub group expects to open around 30 new pubs this year, but revealed it has about 100 target properties in its sights at any one time.

One vendor, who has been in talks with JDW for many months, reports that the company suddenly dropped its offer price by 30%.

Chief executive John Hutson said: "We do not want to find ourselves chasing freehold properties in what is a falling market, especially when you consider rental yields are down by double-digit figures.

"Basically, we 'recce' the property situation and instruct our agents which sites to push for.

"Unlike a lot of other companies, we are still actively acquiring properties, but, despite the slowdown, a lot of vendors will still try to hold out for as high a price as they can."

Establish reality​

He added: "It's really an attempt to establish some reality in a market where prices are generally falling."

A recent survey by the Royal Institute of Chartered Surveyors showed demand for commercial property slumped to its lowest point since 1998 during the second quarter of this year.

Although pub acquisitions have generally slowed, the market is faring better than most of the primary retail sector.

A property expert said: "The JDW move is a reflection of its power as a reliable buyer of licensed property in a market that is certainly slowing quickly.

"It may also reflect the company's concern that costs pressures mean that it needs to pay less to acquire property to get the same return on its investment.

"In other words, if pubs are becoming less profitable because they are costly to operate, this needs to be reflected in asking prices."

JDW founder Tim Martin is forecasting a £35m increase to the group's operating costs, and said the company might have to put up prices in its pubs by about 3% to 4%.

"We have reached a point where price increases on food and beer are inevitable," he said.