Despite challenges, licensed sector continues to perform well, firms say
FROM business rates to Brexit and the possibility of a second independence referendum, the licensed property market has faced several challenges of late.
Yet in spite of this, the market is said to have remained resilient and healthy.
That was the view taken by various commercial property firms, which have shared their insights on the current market trends, as well as the opportunities and challenges that lie ahead.
Jonathan Clough of Smith & Clough told SLTN that “the market for licensed properties in Scotland is extremely healthy at present”.
“We are seeing strong levels of demand across the licensed sector for businesses that are realistically priced and are able to provide sufficient trading information,” he said.
The market for licensed properties in Scotland is extremely healthy at present.
Echoing this view, Alan Goldie, director of The Restaurant Agency, said there remains “a wide and diverse purchaser base still enthused by entering the trade either as a new operator or an existing operator expanding their brand”.
However, Gary Louttit of Shepherd Chartered Surveyors said Scotland’s economy “has been lagging behind the rest of the UK in the last year or so, and that has impacted on the hospitality market”.
But he reckons there are signs of improvement and, despite the challenging conditions, the firm completed more sales and lettings in 2016 “than has been seen for some years”.
Similarly, Brian Sheldon, regional director, Scotland, at Christie & Co, said the licensed property market in Scotland is “not without its challenges”.
“However, realistically priced businesses presented with a good trading history whilst still offering potential for growth will attract interest from the discerning buyer,” he added.
The general consensus between the agents is that location plays a major role in the desirability of licensed premises.
For instance, outlets in major cities, such as Edinburgh and Glasgow, are said to continue to attract the highest levels of interest.
It has never been more important to take the advice of a reputable firm.
Louttit of Shepherd added that Dundee and Inverness are also seeing an uptick in transactions, with Aberdeen and the north east showing signs of recovery, “having undergone a very trying period”.
In terms of licensed sectors, hotels are said to be performing strongly.
Peter Seymour, head of licensed trade and leisure at Graham & Sibbald, said: “There is a real demand for large hotels in many areas of Scotland, including outlying towns from the budget chains; they are now even considering going concerns where in the past they would only consider empty or brownfield sites.”
Louttit of Shepherd Chartered Surveyors agreed.
He said there is “still an insatiable appetite for the development of more hotels in most of our major cities”.
He added that pubs and restaurants are also still performing well. However, nightclubs “remain difficult to sell at present”.
Goldie of The Restaurant Agency said “lower valued leasehold businesses” – those valued at £100,000 and under – such as daytime venues like small cafes or bistros are currently “appealing to a greater audience”.
And Clough of Smith & Clough said it is “seeing demand for a variety of different businesses but certainly bars with a good food offering remain popular”.
The business rates revaluation will play a crucial role in how the sector moves forward.
But ultimately, external factors continue to impact all sales.
Goldie of The Restaurant Agency warned that bank funding in the licensed sector “still remains an issue”, with lots of funding currently obtained via independent investors, friends and family and, at times, crowd funding.
And according to Louttit of Shepherd Chartered Surveyors, the impact of the business rates revaluation this year “will play a crucial part in how the hospitality sector moves forward in Scotland, with many operators put under financial strain by the increases”.
Therefore, whether buying or selling, Sheldon of Christie & Co said “it has never been more important to take the advice of a reputable firm”.
When it comes to selling property, he said “the pricing of the business is crucial and there is a method for doing this – it’s not just pointing a finger in the air”.
This was echoed by Clough of Smith & Clough who said that “it is important to get advice from a reputable and experienced agent with a proven track record of selling similar businesses”.
Pricing aside, Seymour of Graham & Sibbald said a commercial property agent brings many other benefits.
“In terms of the specific way we add value, mainly it is time,” he said.
“Running your business takes time, selling your business also takes time.
“I always advise my clients that they need to maintain the levels of trade they have, and so spending time responding to enquiries, following them up, preparing literature, negotiating the sale, or lease, etc. will restrict the time you have running your business – which may then reduce the turnover or, worse than that, the profit, and therefore the value of your business.”
Looking ahead, Sheldon of Christie & Co said the future remains positive for the licensed market.
“I’m always asked about the future and how we see the market in the coming years,” he said.
“The standard answer is ‘we don’t have a crystal ball’ but what I would say is that businesses will sell in any market as long as debt funding is available and the vendor is realistic with their pricing.”
