Hospitality property prices stabilise as buyer confidence returns

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2010 hospitality property landscape is 'encouraging', David Rugg, Christie + Co
2010 hospitality property landscape is 'encouraging', David Rugg, Christie + Co
Restaurant, hotel and pub property prices have stabilised over the past year, although the restaurants sector was the only one of the three to show any significant increase in average prices, according to Christie + Co.

In its annual business outlook, released yesterday, the hospitality property agent indicated that buyer confidence is returning, while banks appear more willing to offer funding as the market stabilises.

During the past 12 months, the number of deals completed by the company increased by 32 per cent compared to 2009. Prices across the hospitality sector also stopped falling last year, which came as a welcome relief after the declines reported in 2008 and 2009.

David Rugg, Chairman of Christie + Co, said: “We are very encouraged by last year’s transactional evidence since it confirms that prices have reached the bottom of the demand driven price curve. In fact, average prices have increased slightly in some sectors and we are hopeful that this upward trend will continue in 2011.”

Of all its deals in 2010, almost half (44 per cent) were businesses sold on behalf of corporate operators, while the majority of buyers (70 per cent) were local entrepreneurs who lived within 20 miles of the business they bought. This, said Rugg, is one indication of returning buyer confidence.


Restaurant property prices in particular benefited from the increased activity in the market, which led to an average increase in prices of 4.6 per cent. This compares to a decline of 18.1 per cent in the previous year.

High street and casual dining brands were at the centre of acquisition activity last year, with corporate operators once more looking to expand in 2010. Most interest was seen in ‘safe’ sites in key locations, such as London, Edinburgh, Bristol, Manchester and Leeds.

Simon Chaplin, Head of Restaurants at Christie + Co, said: “Market conditions showed signs of improvement during the year, as consumers — attracted by new offers and the growing use of discount vouchers and promotions — continued to eat out.

“The majority of national chains performed well in a challenging and highly competitive environment, reporting sales figures that were either flat or slightly positive. It is worth remembering that this upturn in trading is measured against sector performance in 2009 — in the midst of the recession, when consumer confidence was probably at its lowest — so there is still considerable room for improvement.”


Average hotel prices stabilised in 2010, with an increase in London prices counterbalancing a decrease in the provinces.

Overall, there waa a “negligible” increase of 0.1 per cent, which nevertheless compares favourably to a decline of 19.5 per cent in 2009.

Jeremy Hill, Head of Hotels at Christie + Co, said: “2010 was the year in which some sense of normality returned to the hotel market. The trading landscape, although far from easy, was much clearer than it had been the previous year and hotel businesses focused on improving revenue, whilst still keeping a watchful eye on costs.

“The hotel property market also proved more robust than it had been over the previous 12 months, with investors more willing to commit equity. Transactional activity picked up in the second half of the year, although the provincial markets were particularly price-sensitive and there was limited supply.”


Prices of pubs around the country also stabilised last year, as buyers started returning to the market for “selective acquisitions”. The majority of these were managed freehold sites, and buyers included a mix of existing operators, private equity groups and independent buyers.

Average pub property prices fell just under 1 per cent last year, compared to a decline of 20.1 per cent in 2009.

Neil Morgan, Head of Pubs at Christie + Co, said: “As one of the first markets to feel the impact of the credit crunch, the pub sector showed tentative signs of being the first to recover in 2010. The rate of pub closures slowed during the year and trading performance stabilised.

“After the lows of 2009, there were a number of positive developments to report in 2010. Private equity returned to the sector, operators adapted to the trading environment and pub companies began to re-evaluate their relationships with tenants.”

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