A survey revealing a continuing decline in the UK public house sector, with 45 percent of public house owners reporting a fall in sales in the last year and 25 public house closures every week, has been released today by leading real estate adviser Jones Lang LaSalle Hotels.
According to Jones Lang LaSalle Hotels’ survey of public house investors and owners, the UK sector is undergoing a transformation due to the effects of the recession. The survey shows that public houses which only sell alcohol (‘wet’ public houses) are facing a much sharper decline than those with food on offer. Around 63 percent of public houses which sell food recorded an increase in sales over the last year, compared to a 66 percent decline in ‘wet’ led public houses.
However confidence in the London market remains high, with 39 percent of investors identifying the capital as having the strongest potential for real estate growth within the sector.
Harry Hawksby, Director in the Licensed Leisure and Hotels division at Jones Lang LaSalle Hotels, said: “Whilst conditions remain challenging for the UK public house sector, the medium-term outlook is positive, especially in London and the South East. The number of public houses closing weekly has also fallen from 37 to 25. There is a general sense of optimism, with the glass being half-full rather than half-empty.”
“Financing remains a real concern; there is little appetite for banks to provide cash due to perceived risks. Loan-to-value ratios are typically at only 50 percent, which is stifling growth in the market.”
“Social factors, such as the trend towards drinking at home, together with the general reduction in consumers’ disposable income, are also subduing the sector. However, if a public house is well located, well run and offers something extra such as food, the outlook is relatively positive.”
Public house investors were asked by Jones Lang LaSalle Hotels to comment on the issues and problems they expected to dominate the UK pub industry over the next year. The fall in disposable income was cited as the main concern, by 34 percent of respondents. This was followed by competition from ‘off trade sales’ (the availability of discounted and cheap supermarket alcohol with people staying in and drinking at home) at 25 percent and the availability of finance (20 percent).
Mr Hawksby concluded: “The next twelve months are likely to see the market continue to polarise, with public houses which offer food performing much better than their traditional alcohol-only counterparts.
“As the market continues to improve we could see an acceleration of public houses being offered for sale as the banks and institutions begin to exit properties which are currently being run in administration.”