Christie & Co has predicted an uptick in M&A activity for the pub sector in the year ahead, as funding becomes less difficult and private equity returns to the market.
The specialist business property adviser launched its annual Business Outlook report yesterday (11 January), forecasting that private equity with look to pick up opportunistic acquisitions such as small to large pub groups.
The predictions are based on key market activity, challenges, and trends of 2023; notably, corporate buyers are back in the market, 86% of Christie & Co pub sales were sold for continued to use, and cash remains king.
The report acknowledged that “whilst the UK pub sector continues to demonstrate resilience, parts of the transactional market remain challenging” due to interest rate hikes and inflationary pressures, and pricing will need to adjust further to “fully unlock the market.”
Christie & Co’s pub price index recorded an -8.1% drop in Christie & Co’s in 2023.
Nonetheless, the volume of transactions, deals agreed, and exchanges were all ahead in H2 2023, with the increased level of activity suggesting a more dynamic market in 2024.
The report also predicts regional and national pub companies will look to rationalise their estate and sell off bottom end pubs, while the number of managed pub operations will continue to rise and tenanted pub companies will continue to acquire freeholds up to £1m.
The free-of-tie leasehold market will remain strong as the cost of debt remains high, making the higher end freehold market less obtainable even as cost pressures begin to ease, according to Christie & Co.
Stephen Owens, managing director of Pubs & Restaurants at Christie & Co, commented: “Whilst there were significant challenges during 2023, the pub sector remained remarkably resilient from a trading and transactional perspective against a backdrop of interest rates rises and an inflationary environment. As we enter 2024, we have begun to see signs that these pressures will ease and our experience from the latter end of 2023 is that buyers are beginning to return to the market now that we have a more stable environment.”
