Licensed sector defies recent cut in drink drive limit to show positive growth. By Bob Serafini

Pubs sold for 10 per cent more on average last year, despite a string of problems ranging from new drink driving laws to the independence referendum hangover scaring off traditional English buyers.

Analysis by Christie & Co of deals across the hotel, restaurant and public house markets shows positive improvement in values over the past 12 months.

The number of pubs sold as distressed assets halved in 2015 and encouragingly 84 per cent remained in licensed use.

Christie is the largest of the specialist advisers in this field – the firm sold Charles Forte his first property and Egon Ronay his first restaurant – and their figures predicting growth across their sectors should accurately reflect the current state of play.

A year on from the cut in the legal drink driving limit, the company surveyed 1600 licensed trade operators across Scotland to determine the impact on the hospitality industry.

"The results were startling," said Brian Sheldon, regional director for Scotland. "Around 79 per cent of respondents believed the cut had a negative impact on their business as customers chose to drink in their own home rather than driving to their nearest local pub. In turn, this also impacted on food, with 50 per cent of operators reporting that their dry sales had also fallen. The overall consensus was that the new legislation had adversely affected businesses by 15 to 30 per cent.

"In Scotland, where hospitality businesses are often in remote areas where the only realistic way of going out for a quick pint or a meal is to drive a few miles, our study showed it was indeed rural areas which had suffered most."

Other uncertainties identified as affecting future prospects include introduction of the national living wage, auto-enrolment pensions, business rates reviews, continued supermarket discounting, the impending referendum on membership of the EU, and the oil and gas slump.

"We have also seen a continued lack of migration from the south to Scotland – which has historically provided lifestyle buyers to local markets," said Sheldon.

Overall, however, there are also positives suggesting a strong year ahead, including growing interest from private equity investors, an expanding free house market fuelled by entrepreneurs, and increase in multiple operators seeing an opportunity.

Pub sales included the West Port, St Andrews with principal bar, rear lounge, beer garden, four letting rooms and two flats. It attracted eight viewings and competing offers before being sold to a multiple Scottish operator for in excess of the £1.2m asking price and £460,000 for the flats.

Valuation director George Ranachan said average hotel prices rose 9.2 per cent but Scotland had a two-tier market, with demand for city hotels vastly outstripping more rural locations. The investment sale of the Premier Inn in Argyle Street, Glasgow attracted £6.75m, reflecting a net initial yield of 6.6 per cent, while the administration sale of the closed Ben Mhor hotel in Grantown on Spey attracted 17 viewings, four offers and sold to a first time buyer for £196,000.

Around 70 per cent of restaurants remain in private ownership, but 2015 was the year of the corporate brand, with those in the street food and casual dining sector growing fastest. Christie saw a 33 per cent increase in restaurant instructions, with average prices up 9.9 per cent.

Edinburgh restaurant institution Gennaro’s, with 100 covers plus outdoor seating for 75 in the Grassmarket, has been in family ownership for 30 years but was offered to the market on a new lease with a rental of £70,000 and premium of £275,000.

At closing date, the agents received seven offers ranging from £350,000 to £500,000, once again showing prime locations really are attracting premium prices.

The Seaforth Inn bar, restaurant and takeaway, overlooking the harbour in Ullapool, with sales of £1.5m and profits of £235,000, sold to a multiple operator off an asking price of £1.5m. Not many deals like that in the Highlands.

Ranachan said there was a two-tier market in the care home sector, with quality well-located homes attracting demand beyond current supply levels but poorer distressed sales still remaining.

"Average prices grew 4.7 per cent last year and provision of new homes for self-funded residents will continue to be a driver. Local authority funded providers are inevitably going to experience a squeeze on margins."

A positive example in this field is Rubislaw care home in Aberdeen, with 64 residents in 2009 purpose built accommodation and previously run by a voluntary group and losing money. Christie marketed it at £6.4m, received six bids and completed the sale at £6.8m (equivalent to £106,000 per room).

Child care nurseries saw closing dates and high prices last year. Helped by government policy, parents are increasing their use of formal child care provision. While 81 per cent of nurseries remain in independent ownership, regional and corporate groups are increasingly active.

Research also shows dentists and and pharmacies are booming. The dental market in Scotland achieved exponential growth in 2015, with sector specialist Paul Graham taking on 30 instructions and now with 15 under offer. Prices in the medical sector increased 10.8 per cent, with advisers seeing a 200 per cent increase in both inquiries and viewings.

Demand for pharmacies is higher in Scotland, with local operators expected to fight over limited opportunities and pay a premium, especially for single properties.