Value of the 2019 Dublin Licensed Premises market increased dramatically, but volume of transactions remains below the 10 year average

  • Biggest factor of 2019 licensed premises market was dramatic increase in the volume of higher value, well-located prime Dublin pubs being sold
  • Rising insurance costs remain a cause for concern with pubs in Dublin experiencing an average increase of 50% over the past three years

The reduction in the overall volume of sales of licensed premises continued for the fifth consecutive year and points towards a stabilisation within the market, coupled with a reluctance of operators to offer performing assets for sale. 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 contracted slightly in 2019, with 16 transactions recorded compared to 17 in 2018, 31 in 2017 and 35 in 2016. The volume of sales also remained below the 10-year average of 23 units.

INCREASE IN HIGHER VALUE SALES

The defining characteristic of the 2019 licensed premises market was the dramatic increase in the volume of higher value, well-located prime Dublin pubs being sold. 37.5% of 2019 transactions accounted for sales exceeding €4m, as opposed to just 5.88% of the market in 2018. Activity within the €0m to €4m range accounted for almost two thirds of the market share, with five transactions completed in both the €0m to €2m and €2m to €4m categories.

By comparison, activity from 2010 to 2018 was primarily rooted in the €0m to €2m bracket, accounting for an average of 87.2% of sales.

INDUSTRY CONTINUES TO ADAPT

The manner in which licensed premises trade is evolving. Quality traditional style licensed premises that are well located within well populated urban districts continue to enjoy consumer support with volumes of business reported to be on the increase throughout the past three years.

New-breed innovative operators continue to drive the market by strengthening revenue streams through the blending of food, drink and entertainment.

Low alcohol by volume (ABV) and alcohol-free products have become one of the swiftest development sectors within the drinks market. Sales of low ABV and non-alcoholic beer increased by 60% in 2018 and continue to grow.

SECTOR CHALLENGES

Rising insurance costs have remained a cause for concern and independent research confirmed that pubs in Dublin faced an average increase of 50% over the past three years. The average insurance premium for pubs in the capital is now in the region of €25,000 per annum.

A VAT increase on food sales in Budget 2018 from 9% to 13.5% remains widely criticised by the industry. The impact of this increase has been more acutely felt by businesses in rural areas.

In addition, the cost for operators seeking to trade late has risen. Exemption costs now amount to a rate of €410 per application excluding legal costs and without factoring in extra staffing and entertainment costs. As a result, many businesses outside the prime city and tourist hotspots have pared back their later trading nights, or decided to revert to regular hours completely.

KEY DRIVERS ON DEMAND

The licensed trade has benefitted from the increase in disposable income and discretionary spending levels. As a result, the appeal of licensed premises within prime trading areas is set to continue, both in terms of profitability and funding. A return towards normalised lending to the sector, with an improvement in pillar lending has benefitted would-be purchasers. Alternative lenders have also begun targeting large towns and suburban areas, and are competing with pillar banks for key-trading area.

Lisney expects this increased lending to the sector to increase in 2020 which will further increase the number of funded operators actively seeking opportunities within the market.

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

“The outlook for the Dublin licensed premises market is positive in 2020, and similarly so with Galway, Cork and Kilkenny. Provincial towns and villages have not witnessed the same level of recovery and these businesses will continue to attract limited appeal. This is unfortunately likely to lead to more closure of non-viable premises.”

“Supply levels have been affected by operators opting to continue to trade as opposed to trading up, down or retiring. Under different market conditions, operators who may have retired in recent years have instead chosen to hold onto their assets due to the high growth of the past two to three years.

“We anticipate that these forecasts of more temperate growth could assist in improving supply as many of these operators may now give more serious consideration to retirement as the previous growth levels slacken. We therefore expect the principle driver behind supply will be retirement in the coming years. This will be positive news for those considering expansion who will welcome the anticipated improvement in supply to the market.”

  • Note to Editors: Please see a copy of the Morrissey’s-Lisney Licensed Premises Property Review 2019 and Outlook 2020 attached