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One of the main events that had the ability to derail the property market’s momentum in 2015 was the general election.
The threat of an in-out referendum on Europe could have affected the economy along with the market but, as it transpired, the election result removed this concern for now — although the market certainly quietened for a few weeks in the lead up to the result, the impact was largely negligible.
Economically, the market is steady: interest rates have remained low, which has certainly assisted the freehold market.
Lending to the sector has improved and there is money to buy a pub, as long as the buyer is credible enough to preserve the security of that asset. Related to this, a continued improvement in the residential market has fed through a growing supply of first-time business buyers and new entrants to the sector.
Another prominent issue in 2015 was the uncertainty brought about by the relinquishment of the beer tie — how this would be drafted, negotiated and agreed. With this delayed, it remains unclear how the market rent-only option will affect the pubcos and whether it will lead to significant disposals or repackaging.
The knock-on effect has been a string of leasehold business owners unsure of whether to go to market, while they wait to see what scenario they can engineer going forward. This is resulting in constrains on the supply of premium business opportunities coming to the market.
The freehold market isn’t that active now and remains divided between cheap freehold pubco disposals and the successful freehold sites that have significant goodwill value attached to the property. Going forward, what we are likely to see is a degree of breath holding with prospective purchasers in the freehold market thinking there may be another swathe of pub company disposals on the horizon.
Elsewhere, the effect of the ongoing ACV debate will ultimately prove to be a positive for the market in the long term, despite causing frustration for pub companies looking to dispose of poorly performing sites. ACV isn’t a flavour of the month kind of thing, preserving the number of pubs in the UK is important, so there must be greater understanding from corporate sellers that they’re not going to maximise the value of their property through change of use.
For private owners, however, the likelihood of making a good sale is more to do with it being a good business. Well-run pubs are in high demand and will continue to be so into next year.
Key freehold considerations for 2016:
Key freehold considerations for 2016:
- Impact of the market rent-only option (MRO) will continue to restrict supply of premium businesses
- ACVs will frustrate corporate sellers looking to maximise sale of asset
- Steady economy and low interest rates continues to attract new entrants to the market