Mid-year market report card
After an active eighteen months for the pub market, the experts discuss what they think is to come.
Since the beginning of 2016, pub transactions have set a breath-taking pace in scope and quantity. Some big prices have been paid, as landmark pubs that are generally deemed too good to sell have been placed on the market. Portfolios have been broken up and others have been consolidated in a short amount of time. So can this intensity be sustained? Are we in for a cool-down of the market or is the new norm?
How would you describe the state of the pub market right now?
JLL Hotels & Hospitality: The pub market is relatively polarised nationally as a result of the weight of capital towards eastern seaboard cities and dramatically different trading trajectories between the states and regional locations therein. Fundamentally you have strong demand, and hence pricing, in the fastest growing residential and commercial centres of Sydney and Melbourne, momentum gathering for a similar slightly lagged outlook in Brisbane and selectively for the undersupplied but trade subdued cities of Adelaide, Perth and Darwin. Regional investment trends are characterised by demand for ‘drive-to’ coastal lifestyle-proximate opportunities or higher-yielding regional commodity-driven business locations with differing risk profiles.
Knight Frank: Overall we feel that the market is in excellent shape, despite rumoured interest rate rises on the horizon. Well operated metropolitan pubs are still experiencing growth in gaming, and where possible capitalising on the continued steady sale of PMEs in New South Wales. Food continues to be a key driver for patronage into venues, however without smart management of this high-cost revenue stream, publicans can see the value of their assets adversely affected.
Savills Australia: The pub market is broadly considered to be in a bullish cycle. A number of capital cities are in the midst of being in an extremely buoyant market while other cities and regions continue to improve at varying stages from a low base. Institutional investment has aggressively re-entered the sector and for the most part has defined the landscape over the past 12-18 months via a number of notable mergers and acquisitions. At the very least, institutional investment both directly and indirectly will continue to drive the pub market in most regions for the medium term.
Ray White: The national hotel market remains very firm, with investor interest continuing to outweigh available stock. The acquisition by Moelis of NSW gaming group Redcape in July highlights the level of confidence by which sophisticated investors view the hotel landscape.
CBRE Hotels: The pub market generally continues to perform strongly in 2017 following a real watershed period for sales towards the end of 2016 which was highlighted with the national sell-down of the assets within the Lantern portfolio. While individual transactions have somewhat slowed during H1 of 2017 there has clearly still been strong activity at cap rates and dollar values consistent with the high water marks set at the back end of last year, especially in NSW. Riversdale have achieved strong results on the divestment of their assets and there have been various individual sales which points towards continued buyer confidence in the long term outlook for the sector.