Tuesday 15 December 2009

What value the pub?

We know that pubs are having a hard time. The market is shrinking and the more I think about it the more I wonder if there is anything that can be done to help. Additionally, there are big pubs springing up taking a share of that shrinking market. I'm sorry to mention them again, but The Wetherspoons model is extremely successful and obviously what the vast majority of the pub customers want. If we can get to the point of accepting this then it raises some interesting issues.

Today I have read some detail in a report that has been issued by the commercial estate agents Fleurets. It doesn't really make very good reading unless you are looking to buy or lease a pub. If you own a pub and are hoping the value of your pub has gone up in the last 4-6 years then think again, it probably hasn't by very much. Mind you, not many investments have done particularly well in that time. Of course in business you can expect to potentially lose if you invest in something. That's the risk of doing business.

Please allow me to digress for a short while. If I had bought a shop I could probably sell pretty much what I wanted from that shop. There might be some limitations but basically if it is legal to sell it then I could. If I set up as a butcher, only to find that the bottom fell out of the meat market due to competition from supermarkets or because everybody went vegetarian then I could change to being a baker or candlestick maker or even, should I choose, a newsagents or clothes shop. If things got really tough then turning the property into a house would also be an option. This happens a lot with shops and nobody blinks an eyelid, generally.

A couple of years ago I got into a discussion with somebody regarding this very issue. I was concerned about how this individual was actively standing in the way of a failed pub gaining planning permission for a change of use into a private dwelling. My argument is that if a pub cannot make an honest living for the landlord then it should be sold. The reply was that there were too many people making money by deliberately running pubs down so they could make a killing out of a change of use. This was only made possible by the over inflated domestic property market, or so it was claimed.

Now that we have seen a massive downturn in the economy, one that is argued to be the worst since the Second World War it is alleged, the domestic property market has collapsed. Contrary to the assertion that the differential between the price of a house and the price of a freehold on a pub was distorted, the values of pubs have possibly fallen faster and further than house prices.

What I find even more interesting is that the larger pubs seem to be more desirable and therefore not dropping in value as much. This reflects the fact that there is a minimum trading which makes a pub viable. Below this there are very real disadvantages of the lack of economies of scale. It is sad, but the community pub that is seen as in need of protecting is going to get harder and harder to keep alive due to economic factors.

It might be sad that the last pub in that village of 100 houses is closing, but I wonder if we are fighting an inevitability by trying to prevent a change of use.


Curmudgeon said...

Actually, in urban and suburban areas, it is often the larger pubs on free-standing sites that are closing first as they have more redevelopment potential. The little landlocked ones often seem to have more chance of survival.

Unknown said...

Good point Curmudgeon. The relative effects of the overall site value is important. I know of a good pub we looked at before we bought this one. It had a large carpark but we turned down the prospect because the carpark had already been sold off to developers.

Cooking Lager said...

Lots of points you make here, Davey.

As for the spoons, I think its all about price and value. Customers are not cheapskates, they see the prices and they see that the spoons are no worse and often better than many pubs charging more.

As for campaigning to save pubs? WTF? Do people want boarded up buildings targeted by vandals or thriving businesses?