Buyer appetite for ‘local’ hospitality businesses stays strong

Uplift in market activity in 2020 despite pandemic, but average UK sale prices take hit

BUYER appetite for ‘local’ hospitality businesses is set to remain strong in the wake of the COVID-19 pandemic, property advisor Christie & Co has said.

Launching its UK-wide Business Outlook 2021: Review. Realign. Recover report, the property agent reported increasing interest in community-based operations during 2020, which it said was largely driven by the increasing number of people working from home. And the demand for pub and restaurant businesses in regional towns and rural and coastal locations is expected to continue.

Christie & Co said it has seen an uptick in market activity in the pubs sector since April 2020, driven largely by smaller, single asset transactions; and it said investor appetite in the pubs sector “remains healthy and many buyers appear undeterred from the unprecedented events of 2020”.

A similar uplift in activity was reported by the agent in the restaurants sector, despite the uncertainty brought by the pandemic, with 60% of the firm’s restaurant transactions said to have completed between April and December 2020.

However, Christie & Co’s price index for 2020 revealed a decrease in average prices. Pubs saw a 6.4% drop in average sale price last year, which the firm said followed a period of annual increases and “some of the busiest years of activity in a decade”.

Restaurant prices also took a hit, with Christie & Co’s restaurant price index for 2020 reporting a 17.5% decrease in average prices, which it said follows a period of decline since 2017. “These challenging trading conditions were exacerbated in 2020 as a result of COVID-19,” it said in the report. “Despite this, the results suggest the sector can look forward to an increase in transactional activity in 2021, with 39.9% of respondents [to its survey of operators] reporting that they are planning on selling, along with 38.5% who note they are interested in expanding their portfolio.”

On the year ahead, Christie & Co said it expects hospitality businesses in rural and coastal destinations “will continue to perform well and attract the most investor interest”; it also predicts large pub companies will “continue to divest under-performing assets, both in the tenanted and managed house segments, presenting a good opportunity for equity-backed buyers (both new entrants and existing operators) to acquire freehold property portfolios of scale”.

Stephen Owens, managing director of pubs and restaurants at Christie & Co, said: “2020 was undoubtedly one of the most difficult years that the sector has faced in recent times. However, there is now light at the end of the tunnel with the vaccine roll outs, and for those which come out the other side we expect a strong rebound with customers keen to return to their local pubs and bars. With strong buyer sentiment and appetite, we predict a busy year ahead.”