Dublin Licensed Premises market remains resilient despite impact of Covid-19 – Lisney

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  • Private equity was key player in volume of market acquired – accounting for 50% of transactions
  • Nearly one fifth of sales were conducted off-market in 2020

The reduction in the overall volume of sales of licensed premises continued for the sixth consecutive year coupled with many businesses remaining closed for almost 10 months in 2020 which resulted in a reduction in licensed premises trading volumes nationwide. That’s according to new figures released today by Lisney (incorporating Morrissey’s), Ireland’s largest independently-owned property advisory company.

Activity in the Dublin licensed premises market remained strong, particularly when taking the Covid-19 situation into consideration in 2020, with 13 transactions recorded compared to 16 in 2019, 17 in 2018 and 31 in 2017. 30% of 2020 sales transactions accounted for sales exceeding €4m, as opposed to 37.5% of the market in 2019. While the level of activity is positive in the current climate, the Covid pandemic has had a significant negative impact with some sales becoming protracted with closing dates delayed.

Supply remained low throughout Q2-Q4 of 2020, with many vendors choosing to offer their premises for sale quietly through a targeted process. In the majority of cases the initial feedback from targeted purchasers produced significant price disparity between vendors and purchasers’ expectations resulting in the sale being deferred until more normalised market conditions returned. This will mean the majority of pubs for sale will remain limited, at least in the first half of 2021.

SOURCES OF DEMAND

Many purchasers took the off-market approach throughout 2020, resulting for some 23% of market transactions which realised 49% of the total market value in 2020.

The defining characteristic of the 2020 licensed premises market was the emergence of private equity as a key player in the volume of the market acquired and accounted for 50% of the total market. This was followed by developers and acquisitions for alternative use which accounted for 31% of the transactions and 33% of the total market value. The principal example of the emergence of Private Equity in the Licensed Premises property market is the acquisition of The Old Storehouse in Temple Bar by Emerald Investment in March of 2020 for a price reported in the order of €16m.

ACTIVITY

The pre-Covid market opened strongly with eight Dublin pub sales contracted, however, only six of these sales had completed by year end. Seven sales concluded during the Covid period of 2020 totalling approximately €12.4m and a further seven properties at contract stage totalling a further combined €10.75m, some of which witnessing downwardly revised prices from those originally agreed.

13 transactions were recorded equating to 1.78% of the total market with a combined capital value of €41.63m. Lisney therefore expects the initial months of 2021 to remain relatively quiet. However, purchasers remain active in seeking out opportunities, most of which are being explored via off-market approaches.

7-DAY LICENCE VALUES

Licence values remained relatively consistent prior to the Covid period realising approximately €50,000 to €52,000 in the vast majority of cases ending Q1 2020. The impact of Covid on the licence market for extinguishment and transfer purposes was a reduction of value of the order of 20% to 25% with prices now somewhat stablished at €40,000. Licence demand throughout 2020 continued to be driven by the off-market licence channel.

The emergence of the industry from the Covid period will no doubt influence this availability with potential for an increase in supply from parties that wish to retire from the trade but retain their property.

PROVINCIAL MARKET

The provincial rural market has continued to struggle with limited appetite expressed from outside of the local indigenous community. 2020 was a quiet year in terms of activity within the provincial market with no notable sales recorded in the cities of Cork, Galway, Limerick, Waterford and Kilkenny.

The characteristics of the trading environment in Dublin were echoed regionally with licensed premises that enjoy a local residential customer base coupled with a strong food offering faring significantly better than premises that are city / town centre located, beverage only, tourist driven or predominantly late night focused.

Tony Morrissey, Lisney Director of Licence and Leisure, says:

“The outlook for the Dublin licensed premises market is positive in 2021, however the volume of transactions within the first half of the year will likely remain low as the market adjusts to recovery and emergence from the current Covid 19 pandemic.”

“Sentiment within the market remains positive and most operators viewing the current crisis as a short-term issue, and remaining confident. This sentiment indicates that once normalised lending activity resumes, supply of opportunities to the market should return and healthy levels of both trade and transactions can then occur.”

END