Pub property market to see ‘very quick bounce back’ after coronavirus

On 26 March, housing minister Robert Jenrick urged Brits not to move house during the ongoing coronavirus pandemic, with property app and website Zoopla predicting that housing transactions will drop by as much as 60% over the next three months.

Likewise, the pub sector has unsurprisingly seen a “sharp reduction in overall market activity levels” since Prime Minister Boris Johnson called last orders for Britain’s pubs on March 20​ according to Paul Davey, managing director of hospitality property agent Davey Co.

“That said, from a prospective purchaser’s perspective, many now have far more time on their hands to make enquiries, download particulars of businesses for sale and make further enquiries on the available for sale stock,” he added.

“With regard to pipeline activity of sales already agreed, the vast majority of these pending sales remain in-tact albeit with many largely on hold prior to restarting when we are through the lockdown.”

Not a complete shut down

While James Shorthouse, head of alternative markets at real estate services and investment management company Colliers International, has also witnessed a clear “tail-off” in the number of pub property transactions, he explains that the spread of coronavirus hasn’t instigated a complete shutdown. ​

“​On the supply side, a lot of pubcos and private owners are just dealing with the immediate implications of the virus and how you manage your staff numbers to try and get through the next few months,” he explained. “Buying and selling properties is less of a priority.  

“On the demand side, the issues are partly around banks providing funding – the banks’ position is very much that they’re going to deal with the coronavirus issue, deal with their own staff, deal with their existing customers. They’re unlikely to be processing many new loan applications and are certainly not commissioning many valuations; even if they are, the surveyors and valuers are not able to get access to properties so the whole buying process is coming to a pretty dramatic slowdown. 

“It’s not a complete shutdown, we are still getting offers on sites that we’ve got on the market, but they’re generally from people who have already done the viewings – the process was already rolling,” he continued. “We're not seeing an awful lot of traffic as far as people making new enquiries about what's available or what might be coming up, but that will change as we get through this and people develop more of a strategy for the future.”

Pretty quick recovery 

Shorthouse added that it’s still early days when it comes to gauging the impact of coronavirus and the pub shutdown on the value of on-trade transactions, although he forecasts pub property prices will rapidly rebound from any adverse effects once doors reopen.

“It will, I think, have a short-term downward impact on values, but I would expect that to recover pretty quickly once trading returns and the market starts getting back to some sort of normality,” he explained.

“We’re going to see a very quick bounce back once the restrictions are lifted and pubs are able to trade again. 

“There will be some pubs – those that were perhaps on the sick list already – for which this will have brought forward their inevitable closure, but I see this as a relatively short-term thing and volumes will soon get back to their normal levels.”

Surge in activity

He continued: “As for any discernible effect on pub pricing, we do not anticipate the unprecedented, exceptional circumstances of the Covid-19 shutdown of itself to necessarily affect pub values, but moreover a resumption of market activity when things start to move again,” Davey concurred. 

“If anything, one thing this lockdown has ensured is people will undoubtedly appreciate the value of their local pubs and bars and a massive boost to normal trading levels may well be achieved.

“As we went through the Brexit pause in market activity in the last quarter of last year, we saw a marked bounce back in activity levels and market sentiment in January. 

“My personal view is that when the Covid-19 lockdown is lifted, there will be a surge in both potential new instructions and a thirst to be quenched in prospective buyers.”