Cautious optimism is keeping pub and restaurant markets buoyant. That’s the view of specialist business property adviser Christie & Co, launching its mid-year review of the sector.
Consumers responded positively to the re-opening of pubs from 12th April. This translated to improving like-for-like trading performance and suggests the bounce-back for the sector will be strong. Ultimately, this encouraged investors to keep a positive, long-term view towards opportunities.
There was plenty of corporate pub activity during the first quarter of the year as some operators began to divest their portfolios. Buyers were attracted back to the sector off the back of the government’s lockdown exit roadmap and Budget announcements.
Christie & Co announced the first portfolio transaction of the year, with the sale of ten managed pub restaurants owned by Red Mist Leisure Ltd to private equity-backed Red Lion Holdings, for an undisclosed sum. The team supported a majority of the subsequent corporate activity across the market, which is expected to continue in the third quarter once the sector gets back up and running.
Recovery and opportunity
Encouragingly, the results of Christie & Co’s latest Sentiment Survey indicate a sense of cautious optimism has begun to filter through the market since the last survey in January. One-third of respondents feel positive about seeing some recovery in the second half of 2021. Nearly half see potential opportunity due to the successful vaccination programme, easing of restrictions, and the strength of the domestic staycation market.
The survey suggests buyer demand for hospitality assets will continue to outstrip supply in the second half of 2021, with 17% of respondents noting they will be looking to sell. Twenty-four per cent said they will be looking to buy. This is positive for sellers and may lead to more competitive bidding and dynamic pricing.
Sentiment around pricing has improved significantly, with 68% of those surveyed believing pricing will stay the same or increase, likely off the back of the strong return to trading since reopening. Following a further boost over summer, the team anticipate more operators will be confident to test the market from Q3 onwards.
Key challenges identified for the next six months include the staffing crisis facing the industry, rising costs and food and drink price inflation.
Stephen Owens, managing director of pubs and restaurants at Christie & Co, said: “The first half of 2021 has seen owners hold off coming to market against a backdrop of continued government support and the anticipation of a strong bounce-back, as restrictions have eased with the positive vaccine roll-out.
“We have seen strong buyer appetite from both established operators and new entrants, with more buyers than sellers helping to keep prices strong, particularly for freehold properties in coastal, countryside, and lifestyle locations, with competitive bidding for prized assets.
“We anticipate a busy second half of the year and look forward to announcing some exciting transactions in the coming weeks and months.”
• To read Christie & Co’s full Pubs and Restaurants Mid-Year Review, click here.
