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The public house: a glass half full or half empty? a question posed by Kevin Marsh of Savills

wantspacegotspace.co.uk - The public house: a glass half full or half empty? a question posed by Kevin Marsh of SavillsSavills head of leisure & trading in Southampton, Kevin Marsh, takes a closer look at the British pub property sector in 2012. There have been good levels of activity within the transactional market for British pubs in the first half of 2012. Whilst the large pub companies continue to dispose of non-core assets, often for alternative use, we are also beginning to see more prime properties coming to the market. For example, at the end of 2011 Enterprise Inns announced its intention to dispose of 100 of its top end assets from its estate. Similarly, Young & Co began the disposal of 14 freehold pubs in and around London at the beginning of the year.

These prime assets have experienced strong bidding, particularly for food-led operations in affluent locations. A good example of this is Fuller Smith & Turner’s recent? acquisition of high quality Enterprise Inns properties in Hampshire. In another example, one particular portfolio saw bidding reach multiples of 10x turnover with the existing operator deciding to hold the portfolio and continue to trade the assets rather than sell.

Coinciding with this, Savills reports an increase in the number of enquiries from small to medium sized operators and regional breweries seeking to acquire good quality freehold public houses. This is largely due to the availability of acquisition opportunities created by the likes of Punch Taverns and Enterprise Inns selling.

Prime examples include:

•    On behalf of independent operator, Upham Pub Company, Savills acquired the Spinnaker public house in Swanwick near the popular sailing location of Hamble, Hampshire. Upham has also completed the acquisition of the Thomas Lord in West Meon, which has already been refurbished and re-opened, taking the estate to four pubs with further growth planned.

•    In July this year, Brakspear acquired three freehold pubs in Englefield Green, Surrey, Sunbury, Middlesex and Stow-on-the-Wold in the Cotswolds bringing their estate to 144 pubs.

•    The regional brewer and pub operator Shepherd Neame announced the acquisition of four freehold pubs from Enterprise Inns in June 2012. The properties were all character pubs with good outside trading space located in Canterbury, Deal and Whitstable within the company’s East Kent heartland.

•    Northern brewer Thwaites continued with its commitment to expand its pub estate by acquiring two pubs in the North West of

England. In July 2012 it completed the acquisition of the pubs in Sale, Manchester and Stockton Heath, Warrington from the Spirit Pub Company.

•    The growth of the ‘Craft Beer Revolution’ also continues at pace. This expansion of the bespoke beer market is spearheaded by BrewDog who opened their sixth bar site earlier this year in Newcastle. The Company was founded in 2006 and only opened its first bar in Aberdeen in 2010.

While there has been a distinct increase in market confidence in the pub sector, pint pullers can’t let their guard down yet. The British Beer and Pub Association (BBPA) reported beer sales were down 5.3% in the second quarter of 2012 when compared with the same period last year, partly due to a further 5% increase on beer duty in the March 2012 Budget. The poor weather was also blamed when  Fuller Smith & Turner reported a 1.1% reduction in sales in the 15 weeks to 14 July 2012. Similar lacklustre results amongst the large breweries have also been blamed on the sustained wet weather.

In light of this, it remains to be seen whether the appetite for acquisitions will continue. However, it could be encouraged further if there is an increase in the availability of debt finance as a result of the government’s new ‘Funding for Lending’ scheme which came into operation in August 2012 combined with further rationalisation by the likes of Enterprise Inns and Punch Taverns.

Looking forward to the festive season, trade on the whole is anticipated to moderately improve on last year and we are hopeful that trading will benefit from Christmas falling on a Tuesday and New Year’s Eve on a Monday, giving customers an extra night out in addition to the usual Friday and Saturday evenings. Despite this, weather will be absolutely critical and any bad conditions may damage trade as people choose to stay at home and save money. Christmas time in the pub trade is make or break and, as with previous years, there could be a number of tenants handing back keys after the New Year.

Posted by The Editor (wantspacegotspace) on 4th December 2012

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