AFTER SOME TUMULTUOUS YEARS, IS THE LOCAL LICENSED MARKET NOW STARTING TO NORMALISE?
06 June 2018
Thus far, 2018 has continued on from a positive trading year in 2017 when there was a marked increase in terms of transactional activity. Perhaps the most encouraging element of this is that over the last 12-24 months, the majority of sales were on behalf of willing sellers following a period when distressed sales dominated transactions.
There is no doubt that the licensed sector felt the full brunt of the recession, with substantial falls in asset values and crippling changes in consumer spending. As a result, there were widespread distressed disposals which saturated the market. Furthermore, during the downturn funding from local lending institutions was practically non-existent, thus leaving an extremely limited number of potential purchasers.
This trend continued for a number of years, however, signs of positivity started to creep back into the sector in mid to late 2014. One of the key catalysts for this was undoubtedly the willingness of local lending institutions to re-enter the market and support local operators. This is likely to have been spurred on by Osborne King’s successful disposal of the Kurkova portfolio, which included The Apartment and McHugh’s, with this undoubtedly highlighting renewed confidence in the sector.
As a result, the number of distressed sales began to fall and a situation arose where we once again had both “willing” buyers and “willing sellers.” In both 2015 and 2016, more than £10 million of public house sales completed annually followed by over £15m of sales in 2017.
What is also notable is that the majority of licensed premises were sold to proven local operators who had the confidence to return to the market. We also saw the emergence of some new entrants who, with the backing of local banks, were able to establish themselves in the local marketplace.
In recent years, Osborne King has carried out valuations instructions well in excess of £100m of licensed assets for various lending institutions. We are recognised as the leading licensed valuers and have worked closely with many of the banks in recent years. In our opinion, this approach has helped to restore some normality to what is undoubtedly one of the most volatile business sectors. We anticipate that the market will continue to perform well with this underpinned by the lack of supply of quality licensed premises in busy towns and cities.