Downturn in pub sales reflects upswing in the Irish economy
‘Trading is better now, which means there is less pressure on publicans to sell up’
‘There is still very much a place for the pub in the Irish market’. Photograph: Guinness Archive, Diageo Ireland
Pub sales have fallen in the first nine months of 2017, according to a new report by CBRE. The commercial property adviser found that just 16 pubs have been sold so far this year, amounting to about €17.8 million. In 2016, the commercial property adviser stated that a total of €50 million was generated from pub sales.
“Trading is better now, which means there is less pressure on publicans to sell up,” said John Ryan, head of the hotel and licensed premises department at CBRE. “Pub owners are not overwhelmed with debt and are seeing returns on their equity and capital, meaning they are not being forced to sell their businesses.”
Ryan suggested that the lower number of pubs on the market reflects the overall economy. Unemployment is now at 6.1 per cent and, according to the CSO, and disposable income has increased by 2.9 per cent – from €885.72 to €911.55 – since 2009. “People have more disposable income,” he added. “It’s quite reflective of the economy overall, when we see people spending more in pubs.”
Tom Barrett, head of hotels and leisure at Savills, said this is a good time for the pub market. “There is still very much a place for the pub in the Irish market. People have paid off debts and we’re seeing a longevity of ownership now. Owners aren’t being forced to sell. So this is a more normal market to what we saw 10 years ago.” He also said Dublin city centre remained a competitive area for pub and restaurant premises.
Pubs have been forced to adapt how they operate, Barrett said. With a blurring of the lines between restaurant, pub and nightclub, pubs are now far more reliant on food than they used to be.
“Certain generational trends have also forced that,” he said. “Young people are more health conscious, drink driving laws have come in as well, so people’s relationship with the pub has changed, and they’ve had to adapt to that.”
Surviving DublinTony Morrissey, director of Morrissey’s auctioneers, said pubs need to be making €15,000 per week to survive in Dublin. “If you’re making 67 to 75 per cent gross profit, you’re doing great,” he said. “But Dublin is a three-day-week in the pub business, so pubs need to be run extremely well.”
Every year about 4 per cent of stock will change hands, Morrissey said. Thirty-five units were sold in 2016, one of them for €9 million, amounting to a total of €62 million in sales, €12 million more than the CBRE report stated.
According to Morrissey, 21 units have sold so far this year, amounting to €24 million. “And there are a further seven units with sales agreed, amounting to €14 million.” Reports from CBRE only consider a sale once the new owner is in situ, which is why they have a slightly lower count than Corporate Finance.
Location is increasingly important, with many suburban pubs struggling to turn a profit while city centre pubs enjoy the upturn in the economy.
“There are pockets doing well, some not well,” Morrissey said. “The working class pubs are struggling to sell because ‘bar flies’ aren’t being replaced. Overheads are going up and up. That period between 10.30am and 4.30pm is making the pubs about €2,000 a week but costing them about €5,000 a week.”
Such pubs, he said, are incredibly difficult to sell.