The UK pub investment market has attracted a great deal of positive attention since Britain voted in favour of leaving the EU. While the economic uncertainty created by the referendum result has seen some investors in more traditional sectors pause for breath, this is not the case for the pub sector in which a number of high-profile transactions have completed.   

In August, La Salle Investment Management announced its acquisition of a portfolio of six pubs in a deal worth £17.8 million, reflecting a net initial yield of 4.75 per cent. The properties, which are let to Stonegate Pub Company, Punch Taverns and Spirit Pub Company, are mainly located in the South East.   Notably, the deal represents an improvement in net initial yield of around 1 per cent since the assets were acquired by Aprirose 18 months ago. In addition, we have recently seen prime London pubs trading off market at 3.75 per cent, nearly 0.4 per cent better than a year ago. 

While the pub investment market is not a new one, the large-scale sale and leasebacks undertaken by Spirit Pub Company (2005) and Enterprise Inns (2011), as well as the income strip deals being entered into by Marston’s since 2013, have given the amount of stock in the market a significant boost. The strong fundamentals underpinning the pub sector are what makes it so attractive as an investment asset class: the opportunity to acquire freehold property in prime locations, let to PLC covenants, producing good returns in a low interest rate environment. 

Post referendum, we have also seen increased interest in pubs from overseas buyers who perceive value in the sector as a result of the weaker pound. All of these factors have combined to drive improvements in values and yields. As investors increasingly turn their attention to opportunities which can provide them with long-term sustainable income and growth coupled with strong underlying capital value, now is the time for pubs to shine.

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