The UK pub sector remained resilient in H1 2023 driven by its solid headline performance, amid a strong interest for quality assets and some easing of headwinds, according to a new report from property advisor Christie & Co.

The Pubs & Restaurants: 2023 Mid-Year Review reports investor appetite for the pub sector remains strong, albeit market activity remained subdued in H1 due to a lack of opportunities as sellers wait for stability and buyers become cautious in light of rising interest rates.

Despite some underlying corporate activity from the likes of Stonegate and Whitbread, 80% of transactional activity in the pub sector was driven by the independent market.

Christie & Co further reports an increased demand for leasehold pubs, with a 6% increase in leasehold deals compared to the same period in 2022.

It marketed a selection of 61 freehold pubs on behalf of Marston’s earlier this year, which saw more than 20% of the estate under offer or in legals after two months of marketing. One-third of assets have either been sold or reached deal agreed status in line with last year’s value expectations.

This demonstrates the appetite for pub assets “of all shapes and sizes” and serves as an indication that values are holding up, according to the report.

Despite price chipping in some instances, the lack of stock, along with cash buyers chasing limited assets available, is helping to keep prices “reasonably robust.”

Cash made up 86% of all offers accepted, while the average time for a deal to go from ‘offer accepted’ to ‘completion’ consequently reduced by 22%.

From a historic low level of stock at the start of the year, instructions picked up by 19% “off the back of good headline trading” and the expectations that interest rates, cost pressures, and inflation will begin to ease.

Meanwhile, the wider restaurant market remains tough, particularly for leasehold opportunities, with the high street and leisure parks worst hit.

Looking ahead, stabilised interest rates will result in a significant shift in market sentiment.

Many pubcos will be required to refinance in the coming months, which may unlock the market and create more deal opportunities.

Private equity players have been keeping their powder dry for these opportunities, which may result in larger deals later in the year, according to the report.

“Christie & Co maintains a positive outlook for the UK pub & restaurant markets in the second half of 2023, having observed the sector’s ability to withstand headwinds time and time again over the past few years.”

Stephen Owens, managing director for Pubs & Restaurants at Christie & Co, commented: “Whilst the pub and restaurant sector has been forced to deal with cost headwinds and rising interest rates, headline trading performance has held up reasonably well, which has helped to retain buyer appetite. Buyers are also taking advantage of more properties coming to the market, with strong activity levels in the leasehold market in particular. The lack of significant distress has helped to keep pricing reasonably strong, although rising interest rates has tempered this to some degree. We are optimistic that we will start to see more deal opportunities over the coming months once market conditions improve.”