Good-quality, well-located property will still be sought by a variety of buyers, says Chris Day, international managing director at Christie + Co.
Since the middle of last year the words "credit" and "crunch" have dominated the UK property market, leaving many deals in a state of flux or even collapse. However, we believe the latter half of 2008 will see investors regain their confidence and the flow of transactions will recommence with renewed vigour.
Good-quality, well-located property will still be highly sought-after by a variety of buyers and this, combined with possible solutions to the credit crunch, will push prices up during the latter half of the year.
There is still debt available to fund transactions and there is also plenty of private capital. While high leveraged "mega-deals" are most likely to be affected by the credit crisis, single-asset deals and smaller portfolio deals are still deliverable, albeit at potentially higher finance costs, and with less leverage being available.
In the pub sector the decision by Admiral Taverns to curtail its acquisition programme will give a much-needed boost to the free-house market and will enable a range of private buyers, previously excluded from the market, the chance to buy freehold pubs.
Pub groups will continue to churn their estates and the smoking ban will also claim further victims.
The financial instability and a more challenging trading environment have also increased the possibility of further consolidation in the pub sector, including the possibility of the break-up of Mitchells & Butlers.
Other companies have been pushed into administration, including Laurel Pub Company, albeit briefly, Sports Café, CanDu and Massive Pub Company. However, this has led to new companies entering the market, including Agilo, the "specialist situations fund" which has recently acquired the majority of Sports Café and CanDu.
The view in the restaurant sector is mixed. In general, the established operators are still very much in expansion mode but because of the current climate the feeling is they can do a number of deals at more competitive prices.
In the major European hotel markets trading fundamentals remain strong, while the outlook for hotel trading continues to be very healthy.
This year we believe the volume of single-asset and small-portfolio transactions in the hotel market should be similar to 2007. There will be fewer disposals by the major hotel companies in 2008 for the simple reason that they have little left to sell.
At present, the general feeling in the marketplace is one of apprehension, but we believe this current passive state will be replaced by an increasingly active one as the year progresses.