Click here to read the Survey of Pub Prices January 2023
2022 was a challenging year for the property market, especially in the pub sector. We started the year on the back of the Omicron Christmas trading restrictions and facing a future with declining government support. Trading was starting to get back to normal post Covid, and interest rates were still only 0.25%.
As we all now know, normality was still far from our grasp with the invasion of Ukraine on 24 February triggering the fuel and confidence crisis that followed. The Bank of England base rate increased in February, April, May, June and August, so that by the time Liz Truss was elected the base rate was already 1.75%.
The mini budget on 23rd September, delivered by Kwasi Kwateng, accelerated the economic deterioration with the pound slumping within hours and the next day the cost of borrowing soared. The appointment of Jeremy Hunt on 14 October steadied the market but couldn't prevent another increase in interest rates on 4 November to 3% and again to 3.5% on 15th December - a 14 year high, although still below the 4-6% range experienced in the 15 years from 1993 to 2008.
Despite the economic and political turbulence, demand for property remained strong and this applied for the majority of pubs for most of the year. The market characteristics experienced in 2021 continued, with a shortage of supply being the lead factor. Business failures, repossessions, and administrations didn't increase in any significant numbers in the pub sector and owners who weren't being forced to sell were choosing not to.
It wasn't until Q4, when the reaction to the minibudget became apparent, increasing utility costs were taking effect and predictions of a significant number of pub failures in H1 2023 increased in volume, that market conditions changed and demand eased. Many buyers took a breath and decided to wait to see if the New Year would bring a flurry of new, cheaper opportunities.
Reports on pub numbers mid-way through the year indicated that closures were lower than many had expected (200 fewer in the first six months). This is undoubtedly as a result of government support schemes and a resilience of the sector which bounced back quite strongly post Covid, all helped by increased staycations.
There has also been an increase in leisure operators taking high street retail units, particularly late night and experiential leisure operators, often taking large units in former department stores. This has played a major role in helping to rejuvenate struggling high streets bringing footfall and vibrancy whilst avoiding dead spaces from vacant retail units.
Whilst pub use is sui generis, the introduction of Class E has allowed food focused operators to benefit from relaxations in planning laws and although licensing remains contentious in some areas, it has opened up many opportunities. There is certainly a place for the traditional alehouse, but customers, particularly in the younger age range, are demanding a greater experience. Operations like craft beer and cocktail bars are on the rise and filling this gap.
In many towns and cities, new entrants are creating new concepts. All day formats have shown terrific growth and premium pub offerings are opening in a number of our towns and cities.
Craft beer and on-site breweries have proved extremely successful as they create an occasion, as opposed to the same old line up of beers and lagers. People are willing to pay for the experience and point of difference, which makes these venues popular and, what's more, they often cannot be replicated at home.
2023 will be an interesting year and will provide challenges for all, however the sector has proved resilient over many years. There are always new entrants and the sector continues to be one of the innovative industries that will hopefully overcome many of the challenges that lie ahead?