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Following a tough two years of curtailed trading and ever-changing public safety restrictions, Australia’s watering holes are regaining their vibrancy – and investors have taken note.
As Vanessa Rader, Ray White Commercial’s head of research, explained, the pub segment experienced one of the greatest downturns during the COVID-19 pandemic.
“Lockdowns and then constant changes to occupation limits, mask mandates and vaccination requirements for staff and patrons saw the pub sector one of the hardest hit,” Ms Rader said.
But lately, it appears fortunes are looking up for pub owners looking to sell.
“Demand to purchase these assets took a strong positive turn in 2021 and this trend is set to continue in 2022,” Ms Rader said, citing several recent sales that smashed records in NSW.
“Looking at NSW alone, $1.427 billion worth changed hands in 2021 – this was up 143.88 per cent on 2020 results,” she revealed.
The Vineyard Hotel, located in Sydney’s outer north-western suburbs, set the 2021 benchmark in October when it sold for $68 million just hours after the property’s expressions of interest campaign had closed.
It was quickly matched by the sale of the Brunswick Hotel in Brunswick, NSW, which also went for $68 million in December 2021.
They foreshadowed an increased appetite on the part of investors for drinking and gaming quarters, which was verified in early 2022 when a new national record was set by the sale of Sydney’s Crossroads Hotel for approximately $160 million.
This transaction, which saw former Sydney lord mayor Nelson Meers take the reins of the Casula establishment located just off the Hume Highway, surpassed the previous high price paid for a pub, which was notched just prior to COVID-19’s global spread.
The Beach Hotel at Byron Bay held the title throughout the pandemic, having netted $104 million in February 2020.
Though the Casula sale represents something of a return to normal, across the sector, it’s still clear that the pandemic has made its mark. The types of assets, as well as buyer intention, have undergone subtle shifts over the intervening years.
“Many purchasers have identified an opportunity to provide quality entertainment as well as upgraded food and beverage offerings in response to population shifts in growing regional communities,” Ms Rader noted.
Changes to legislation around the geographic movements of poker machine entitlements also have been a driving factor in the appeal of pub assets, according to the economist.
And the availability of financing has been a motivating factor in encouraging buyers to bite the bullet.
“Financing has been key for the vibrancy of this market. Both bank and second tier lending has supported pub transactions over the last 18 months and, with more off-shore funding options entering the market, this is likely to be a feature during the year,” she said.
“We have seen a number of experienced family groups, consortiums, and new players seek to grow their pub portfolios and we expect to see more generational assets come to the market looking to capitalise on the strong market conditions after having endured the difficulties which lockdowns and COVID-19 brought.”
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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