Investors wait for pub smoke to clear

INVESTORS are waiting for the smoke to clear on the workplace tobacco ban before sinking their money into pubs, an overview of recent property sales suggests.

Pub sales in Dublin are holding their own, and have even picked up a bit after several lean years, but potential buyers are taking a more cautious approach to premises in the rest of the country.

“There is a good deal of business on hold,” said Bill Morrissey of Morrisseys Auctioneers which handles sales both in the capital and nationwide. “There is an element of uncertainty and it has delayed people making their minds up.

“A pub is a business as well as a property so it’s a long-term investment. It’s not like buying shares that you can dump at the push of a button. Purchasers are going to be more discerning and, if pubs are feeling the pinch, buyers are going to take a rain check.”

Mr Morrissey warned against laying the blame for any fall-off in sales to the smoking ban alone, however, pointing out that higher labour costs, escalating insurance premiums and rising drink prices had all eaten into the profitability of the trade. “When you throw all of that in the pot and then add in the smoking ban, it’s been a very difficult few years for the trade. It’s quite a resilient business in general and, from January to March, we were beginning to see a bit more activity, but it has been quieter since then.”

The trend appears to have been bucked in Dublin where sales for the first six months of the year totalled 85 million, matching the total sales for the 12 months of 2003.

An even more striking contrast with the situation countrywide comes from the evidence that business in the capital picked up in the months following the smoking ban after a relatively slow start to the year.

“It has been one of the busiest sales periods of recent years,” said John Hughes of CB Richard Ellis Gunne (CBREG) auctioneers.

“These results will be very encouraging come at a time of increased uncertainty in the trade.”

A year on year comparison by CBREG shows that city pubs are also holding their value with the average price of a pub sold between January and June this year reaching €3.25 million, up from less than €3 million last year.

However, Bill Morrissey said that, while some sectors of the business were doing well, their performance still compared negatively with the heady days of the late 1990s. He estimated that The Playwright pub in South Dublin which sold for an all-time record of €8.1 million last month would have got €10 million four or five years ago.

“It’s hard to make a direct comparison with the period pre-2000 because so many new factors have come into play, but there will be an important comparison to be made between now and six months from now.

“From the time a pub goes up for sale to the time it’s sold usually takes three to four months so we’re only getting to the post-ban sales around now,” said

Mr Morrissey.

“The big question will be, is the fall-off nationally going to be a short-term thing and is the market going to correct itself or is this the start of something that’s going to get a lot worse?

“We won’t know the answer to that until later in the year.”