Pub sales volumes and M&A market activity up in 2021

21 January 2022

Christie & Co has launched its annual Business Outlook report, ‘Business Outlook 2022: Adjust, Adapt, Advance’, which reflects on the themes, activity and challenges of 2021 and forecasts what 2022 might bring across the industries in which Christie & Co operate, including the pub sector.

Following the business disruption and challenges caused by COVID over the last two years, it was encouraging to see the UK pub sector get back up and running in 2021. The number of businesses that reported a strong return to trading once all operating restrictions were lifted on 19 July for England and 9 August for Scotland, demonstrated the significance that British people place on visiting the pub, underpinned by the successful vaccination programme and ongoing stimulus of government support.

The report reveals that the transactional market remained buoyant in 2021 and Christie & Co’s pub sales volumes were up 103% on the previous year. Despite the unpredictability caused by the emergence of new COVID variants throughout the year, 47% of these properties were sold to private buyers and 87% were purchased for continued use as a pub, indicating there remains an appetite for purchasers to buy and operate pubs. Freehold assets with letting rooms in popular rural and coastal tourist locations remained most attractive, driven by the staycation boom.

The report notes that the M&A market began to heat up in 2021 and Christie & Co was involved in several of the reported tenanted or managed portfolio transactions. This included the first portfolio transaction of the year; the sale of a majority stake in ten Red Mist Leisure public houses to Red Lion Holdings.

Throughout 2021, the large pool of buyers seeking quality pubs outstripped the level of supply, as many operators have managed to weather the worst of the COVID storm due to government support. The imbalance in the demand and supply equilibrium has offset any potential negative impact of trading and cost issues and created an upwards movement in Christie & Co’s pub price index for 2021, with average prices increasing 3.3% on the previous year.

Looking to the year ahead, the report also outlines Christie & Co’s market predictions which are:

• Race to “premiumisation” and operational efficiencies to help drive margins and offset operational headwinds and inflation
• Benefits of “localisation” and working from home set to continue for regional towns and cities
• Increase in supply as operators re-evaluate their estate post-COVID, taking into account CAPEX and other increasing cost pressures. Operators who fail to invest will fall behind
• Continuing competition between the fast-growing PE backed companies as well as multiple operators and regional pub co/brewers eager to fulfil their expansion plans will lead to a greater diversity of buyers and sellers this year

Stephen Owens, Managing Director of Pubs & Restaurants at Christie & Co comments, “During 2021 we saw demand exceeding supply for the right kind of assets and this resulted in positive price movements, notwithstanding the operational and financial challenges that Covid brought. As we move into 2022 and with hopefully the worst of the pandemic behind us, we can expect a more normal trading environment with an increasing number of buyers and sellers returning to the market.”