Hotels, restaurants and pubs lose around one-third of their peak values
Hotel property values have plummeted 34% since the market's peak in 2007 while restaurant prices have fallen 30% since their 2008 high, a new report by property agent Christie + Co has revealed.
The company's study into property values for 2009 saw double-digit falls across the hotel, restaurant and pub sectors. Hotel values were down 19.5%, while restaurant prices fell 20.1% and pubs 18.1% for the year.
Meanwhile pub values have now fallen 29% since their peak in the fourth quarter of 2007.
Christie + Co said that distressed cases accounted for a "large percentage" of transactional activity throughout the year, with its bank support and business recovery team assisting in more than 350 distress cases involving 1,600 assets across all of the sectors it operates in.
RESTAURANTS
Simon Chaplin, head of restaurants at the company said that administrations and promotions had "overshadowed" the restaurant sector in 2009 and added that he expected deals and promotions to remain with the sector well into 2010.
He said: "Transactional activity, which had slowed in 2008, remained at a low level during this year. The appetite for medium-sized packages remained muted and - until debt and credit markets reopen - there is little likelihood of a return to the M&A activity, which characterised the restaurant sector pre-2007. Demand for prime sites in key locations, such as London, Manchester and Birmingham has remained strong. However the lack of funding for new developments has also curtailed the number of deals and expansion in the sector."
Christie + Co said it had found that a buying vacuum had been created in regional markets into which established local operators have started to move, as national operators focus on paying down debt, raising new funds and streamlining. Some emerging operators such as Jamie's Italian and Cote have also been able to grow.
The company also said it expected smaller operators with similar offers regionally and nationally to explore mergers in 2010.
"The current mood in the market is one of cautious optimism as we head into a recovery, with like-for-like sales continuing to show resilience and established operators set to return to the market in earnest to seek out opportunities this year."
PUBS
Christie + Co managing director Chris Day said he expected a "fragile recovery" in the pub sector in 2010.
Neil Morgan, head of pubs at the firm said he expected the private freehouse market to grow further in the coming year as national chains continue to dispose of freehold sites, with a corresponding drop in tenanted house numbers.
Operators such as Peach Pub Company, Geronimo Inns, Brunning & Price and Heartstone Inns are expected to continue to expand.
Meanwhile, Punch Taverns, which put a further 300 pubs up for sale late last year, Enterprise Inns and Admiral Taverns are all expected to make more disposals. Christie + Co also predicted that national operators like Marston's and Greene King would return as buyers later in the year.
Morgan said: "As we predicted in Christie + Co's Business Outlook 2009 publication, regional brewers and multi-site operators continued to take advantage of the lack of competition from national chains, to bolster their estates through freehold acquisitions, especially in the first half of the year."
HOTELS
London hotels held up significantly better than regional UK markets and saw slight year-on-year growth in values towards the end of the year. Christie + Co said that the number of new hotels in UK regional markets had increased supply which was likely to contribute to the challenges in 2010.
Meanwhile the company said that speculation at the start of 2009 that the budget sector would escape relatively unscathed as customers traded down to more affordable accommodation "only partially materialised".
Jeremy Hill, Christie + Co's head of hotels said: "Trading fundamentals came under increasing pressure during the first half of 2009, leading to a number of operator failures, whilst others faced uncertain futures. A near total lack of visibility in terms of forward bookings contributed to an already challenging trading environment."
But the firm said the mid-term outlook for the sector became more positive in the second half of 2009, and predicted that it would continue over the next 12 months unless there are further shocks to the economy.
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By Neil Gerrard
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