Property values return to growth

Pub, hotel and restaurant prices increased in 2013, says report

• George Ranachan said the property market has picked up pace.
• George Ranachan said the property market has picked up pace.

By Matthew Lynas

PUB property values have increased for the first time since 2007, according to a new report from Christie & Co.

The property firm’s most recent Business Outlook report, unveiled recently at Glasgow’s Grand Central Hotel, found the value of UK pubs grew by 3.3% in 2013, while 67% of pubs sold by the firm continued to trade after their sale – a 5% increase on 2012.
An improvement in the economy, coupled with an increase in buyer demand, was credited with raising values, which the firm said resulted in “regular examples of businesses selling for above their asking price”.
In the tenanted sector, pub disposals were found to have declined to what the firm described as “sensible levels”. Christie & Co attributed this to the efforts of pubcos to improve relationships with tenants.
The report also highlighted a reduction in “estate churn” as pubcos were said to have “reached a point of satisfaction with their estates”.
Neil Morgan, head of pubs at Christie & Co, said 2013 “sent a strong signal” that the pub sector is picking up in trading performance for both single units and companies.
“More sold pubs remaining as pubs than ever before, plus the continuing trend towards the acquisition of pubs by experienced operators and entrepreneurs returning to the sector, leaves us confident that the pub sector is in as healthy a position as it has been for many a long year,” said Morgan.
The Business Outlook report concluded that property values across the hospitality sector had returned to growth last year.
Hotel values reportedly increased by 5.7%, while restaurant values rose by 4.7%.
Hotels of more than 100 bedrooms in Glasgow, Edinburgh and Aberdeen remain of interest for operators and investors, according to George Ranachan of Christie & Co.

• Recent Christie & Co sales include Firewater.
• Recent Christie & Co sales include Firewater.

He said a two-tier hotel market continues to exist in Scotland, where businesses sold while still trading are able to outperform closed hotels on the property market, highlighting “deep discounts” and cash purchases on closed hotels over the last few months.
For the restaurant trade, new openings were found to have increased by over 11% in 2013, driven in part by growing private equity funding.
However, Christie & Co predicted that brand-less, ‘image-less’ and traditional restaurant concepts are likely to find themselves under pressure this year from both branded rivals and the broader food offering from pub chains.
Blurring of the lines between pubs, gastropubs and restaurants looks set to continue, according to Ranachan.