Hear From The Experts: James Davies

What lies beneath in the Leisure Property Market

Contrary to some reports about a lack of availability in the market, at Fleurets we have seen a 10% rise in the number of instructions we currently have on the market in 2023 with the spike being an increase in private client instructions. That said, there has been a drop in corporate stock coming to the market in 2023 with around 20% fewer being on the market than this time last year.

This might be in part due to the ownership structures of the larger companies being in (relatively) good health, so not requiring cash generated by selling and possibly with one eye for when market conditions improve, rather than selling at a perceived discount. With rising interest rates to combat the even higher rates of inflation, money is more expensive to borrow which in turn has the same effect on some buyers, waiting for interest rates to lower again before entering the market.

Now what I have written above is true, but also fairly obvious to anyone connected with the sector, but what it doesn't tell you is the bigger picture of the significantly increased number of off market transactions taking place.

With the shortage of labour both front of house and in the kitchen, attracting and retaining staff has never been more difficult. This, alongside the possible loss of customers, can be major factors to consider when someone is considering selling.

Understandably, some potential sellers are very nervous about advertising their businesses and 'word getting out' of a potential sale so the discreet and confidential approach is preferred.

We have therefore seen an increase in the number of off market transactions with instructions being offered to a select number of the most likely potential buyers and sales remaining confidential until the keys are handed offer.

This approach will only work if we can identify and know the most likely buyers, so generally the business in question needs to either have a turnover strong enough to appeal to the corporate market, have the potential needed, or have a special reason why it will appeal to a specific sector.

So in summary, when we look back at Summer 2023, it will be recorded as a challenging period for leisure property transactions but look beneath the surface and there is more activity than would first appear. There are still good quality buyers acquiring across most sub sectors, we just have to work harder to find them.