Market makes up for lost time

Interest strong during lockdown, firms say

THE impact of coronavirus has been felt across Scotland’s licensed property market, however interest in businesses in the sector has remained consistent throughout the lockdown; and, as measures are gradually eased, there are signs that the market is beginning to pick up pace again.

That is the view of commercial property firms, which told SLTN that interest from prospective buyers in  both rural and city centre hospitality businesses remains strong, despite concerns about levels of public confidence and operating restrictions.

Alistair Letham, consultant at property firm Graham & Sibbald, said the rural property market has momentum and that interest in city centre “hot spots” is “excellent”.

Letham said: “Generally speaking the interest has been pretty consistent throughout the lockdown period.

“We have always seen interest, especially in some of the more notable disposals we are acting on, like Kincraig Castle.”

“Since July we have definitely seen more interest in rural, remote and secluded disposals we are handling. These tend to be small to medium-sized hotels or bars and restaurants sited in their own grounds and out of town. The other hot spots remain the city centre bars, restaurants and takeaways. Interest levels in leases for this type of unit has been excellent during the past three months.”

Jonathan Clough, director at Smith & Clough, agreed that leaseholds are catching the eye of prospective buyers.

“One thing we have noticed with the deals we have agreed over the last few weeks is the demand for good leasehold businesses with premiums around the £50,000 mark or below, where it appears that some existing operators are taking advantage of the bounce back loan scheme and cheap money on offer to purchase another business,” he said.

“We have continued to receive healthy levels of enquiries for businesses right through lockdown, however as restrictions have eased and people have been able to view businesses again, we have seen a further increase in demand and buyers actually being in a position to progress deals which should lead to an increase in deals being agreed.”

And Alan Goldie of The Restaurant Agency, said buyers are driving the market.

“Potential buyers have remained enthusiastic throughout the measures as they know it, for now, remains a buyer’s market with a softening of prices and wider choice.”

While there is optimism surrounding buyer interest levels, there has been a “freeze” in transactional activity as a result of the pandemic, according to Ken Topping, director at property firm DM Hall, who said lenders may take a cautious approach to prospective clients for a time.

Topping said: “A fundamental pre-requisite to normal market conditions is appropriate access to commercial loan finance.

“There will be some lenders viewing the hospitality sector cautiously in the intervening period, as ultimately, a successful buyer of these types of business have to be demonstrably capable of servicing the debt of the loan through generating acceptable levels of income and profitability.

“The Scottish hospitality sector is one which has proven itself in recent decades to be highly resilient and the lockdown measures may be viewed by many as yet another hurdle they need to get over, or around, in the obstacle course they have faced in recent years.”

Taking a similar stance, Brian Sheldon, regional director for Scotland at Christie & Co, said a robust business plan for funding proposals is vital for potential buyers.

“Quality of information is still key when presenting new funding proposals to lenders – borrowers will need to provide a sound business plan with a COVID-19 impact statement and forecasts,” he said.

“If a business was viable pre-COVID-19 then the wider view is that it’s likely to be viable again once everything has settled down.

“We are seeing strong interest in the leasehold market, whether that be an existing free of tie lease or alternatively a freehold sale where the operator would be interested in creating a leasehold opportunity. This offers a low entry point for those wishing to enter the sector for the first time.

“The early signs are positive and where we are today compared to April and May is progress and there is much to be hopeful about.”