15/01/2015
Click here to download the Pubs sold for alternative uses statistics.
With the protection of pubs still very much in the political glare we have undertaken our annual review of freehold pub sales. These include sales where we have first hand knowledge of the transaction. We have considered the intended uses, the most common alternative uses and the impact of being listed as an Asset of Community Value (ACV).
Intended Uses
In 2014 we saw regional variations of what Pubs were used for after they were sold. 64% of sales in the South remained as pubs compared with 50% in the North, perhaps reflecting greater confidence in the trading potential and continued viability of pub use in the South.
The most common alternative use for pubs sold has consistently been residential. The percentage being converted to housing of some sort has increased for the third consecutive year accounting for 60% of alternative use sales in 2014. Alongside this is a reduction in the percentage sold for restaurant use and an increase in the percentage sold for convenience stores and for B&B/hotel use. The changes reflect the increasing viability of the pubs being sold and growing confidence in the sector, as well as the improving residential market more often leading to the values for residential use exceeding the values for other alternative uses.
Sale Price Variations
The average sale price of freehold pubs sold for continued use has been higher than the average achieved for those sold for alternative use in four out of the last five years. In the North the average sale price for continued pub use has been higher than for alternative use in each of the last five years, being 14% higher in 2014. The picture is very different in the South, with the average sale price lower for continued pub use in the last three years, being -18% lower in 2014.
Assets of Community Value (ACV)
The Localism Act 2011 required Local Authorities to maintain a Community Asset Register. It was intended to give community groups the opportunity to register a property as a Community Asset and impose restrictions on the sale to allow them time to submit an offer to purchase it for the benefit of the community. It came into effect without great fanfare. Many people, including some local authorities, weren't aware or prepared for it, however, as a result of increased publicity more pubs are being listed as ACV's (there are now reported to be 600 pubs registered as ACV's) and it is increasingly impacting on the sale of public houses.
In 2014 Fleurets sold 11 pubs that were listed on the Register (up from 3 in 2013). We have investigated each case to consider the effect the registration had on the sale process and the ultimate outcome.
Sale of 11 Pubs listed as Community Assets
- 3 sites purchased by the community group
- 3 sites sold for alternative use
- 6 sites considered to have been sold for a lower price due to the ACV listing
- 7 sales considerably delayed due to the ACV listing
- In 2 cases it was felt that the ACV listing "saved" the pub use
- In 1 case it was felt the ACV actually prevented the continued pub use
- In 3 cases it was felt the ACV listing nearly prevented continued pub use
In our opinion, on this sample of 11 sales, 1 additional pub was saved as a direct result of the ACV listing, however, our experience to date suggests there is a risk that an ACV listing could be counter productive given that 3 other sales lost a buyer for pub use and nearly resulted in the properties being sold for alternative use.
Whilst some communities have been given the opportunity to purchase their local pub (and a reported 50 or so have since the start of the legislation), it has not however, been beneficial in all cases. It does delay sales considerably and our experience suggests it can impact on the likely sale price.
ACV's remain in their relative infancy and the volume of sales where a listing has been in place is low. The sample may therefore, be too small to draw firm conclusions, however, our early experience of dealing with pubs listed as ACV's is mixed, both in terms of its benefit to the Community involved and the impact on the owners.
It will be interesting to see how this plays out going forward as there are questions that only time will answer.
For example:
- Will the pubs "saved" by the community group be commercially viable or will they become a burden on the community for years to come?
- Will the number of ACV listings continue to increase as pubs being sold improve in quality and become increasingly viable for continued use?
- Will owners decide to challenge decisions made on ACV listings and/or seek compensation through the courts?
More pubs continue to be listed as ACV's whilst the number of pubs being sold by the big Pub Co.'s has significantly reduced. The number of sales of pubs listed as ACV's may not therefore, significantly increase in the year ahead, however, we expect that the number of private owners that are affected by the legislation will increase. Only time will tell whether the legislation will be considered to have achieved its goals or not.
Click here to download the Pubs sold for alternative uses statistics.