Third of operators looking to buy sites

Property adviser Christie & Co’s Business Outlook 2023: Finding Clarity​, reflected on themes, market activity and challenges of 2022 and forecasted what this year could bring for the sector.

Its sentiment survey of pub professionals also showed 27% were not aiming to buy or sell while 15% were planning to do both.

Christie & Co advised on more than 2,100 hospitality businesses across the UK last year, with most of pub transactions including individual asset sales, as the market for pub assets under £500,000 remained resilient, which mirrored what was experienced in 2020 to 2021.

The number of new instructions increased by more than a quarter (29%) compared to 2021 with a 4.8% rise in the number of pubs that achieved their asking price.

Purchase activity

Moreover, almost nine in 10 (87%) of pubs sold were bought for continued use as a pub and 5% were distressed sales, half of which were seen prior to the pandemic.

According to the research, freehold assets remained the most attractive to buyers although, there was also good demand for free-of-tie leasehold sites in prime locations across all regions.

Overall, deal times stayed protracted and rising interest rates and difficulty in pricing debt has dampened the merger and acquisition market however, this is expected to pick up this year.

The report anticipated this year will bring an uptick in distressed activity and the return of single asset disposal campaigns.

It also predicted there will be a rise in merger and acquisition activity as operators look for savings and synergy.

Escalating costs

Furthermore, 2023 could see the return of opportunistic buyers and private equity as well as managed house numbers to remain static in light of escalating cost pressures.

It also suggested a number of pub companies, such as RedCat, Red Oak and Greene King are continuing to be particularly acquisitive, after exchanging and completing on several sites with the property adviser’s support of late.

Christie & Co managing director of pubs and restaurants Stephen Owens said: “2022 started off strong, with a number of pubco buyers actively seeking similar types of quality assets and this demand, alongside a lack of supply, helping keep pricing strong.

“As we moved into the second half of the year and the sentiment among buyers and sellers became more cautious due to challenging trading conditions, the market outlook became more ambiguous, although headline trading remained resilient.

“Subsequently, values continued to hold and we have kicked off the new year with increasing levels of activity, which should provide some exciting opportunities for buyers.”