The first half of 2017 has seen the New South Wales pubs market outperforming all other property sectors in the state, with some sizeable transactions occurring so far in the year. Victoria has also performed well, with high asset turnover as investors maintained their strong interest in both leasehold and freehold investment assets.

“Turnover on the Eastern seaboard is subdued in comparison to the extremely high levels of activity we saw in 2016 due to owners’ unwillingness to part with prized assets, however, both NSW and VIC have performed strongly and demand is still extremely evident,” Ben Martin-Henry, CBRE Research Manager said.
 
Daniel Dragicevich, National Director, CBRE Pubs Brokerage, said the reduced availability of metropolitan stock in New South Wales, as well as tightening yields, is pushing investors to coastal and regional locations in order to secure quality assets.
 
Metro NSW assets are still the preference but with low levels of A-grade supply premiums are still being paid for them. Coolibah Hotel in Merrylands sold on an 8% yield for $39.5 million and the Five Dock Hotel in Five Dock sold on a 7.8% yield for $28.75 million. 
 
“As an increasingly popular alternative, quality coastal and regional assets have been in strong demand, with investors actively seeking A-grade coastal/regional pub opportunities over B-grade metro pubs,” Mr Dragicevich said.
 
In the first half of the year, CBRE has sold the Bateau Bay Hotel, Bateau Bay for $12.5 million, a 9.75% yield; and the Gunyah Hotel, Belmont for $11million, a 10% yield.
 
The report states that an emerging trend in New South Wales is the opportunity for investors to improve the food offering in establishment with hoteliers are bringing in top quality chefs to establish food as a strong drawcard.
 
In Victoria, demand for quality assets is currently outweighing supply. Freehold pubs are in particular high demand, with metro opportunities being quickly snapped up to take advantage of Melbourne’s thriving hospitality scene. A decreased supply of traditional metro freehold pubs has resulted in yields compressing to 4%-6%, with regional pubs remaining at 8%-10%.
 
Recent metro sales include the Marine Hotel in Brighton on a tight 3% yield for $15.8 million and the Beach Hotel in Albert Park on a 4.2% yield for $18 million.
 
In South East Queensland, freehold going-concern pubs remain tightly held with a limited amount of stock available. Assets with a high number of gaming machines are in particularly strong demand, with investors having to pay a premium to secure prized assets such as the Homestead Tavern in Boondall which sold for $15.6 million in February this year.
 
“Coastal assets have yet to benefit from the limited stock in the South East market, with investors remaining wary about investing in more remote locations subjected to the mining downturn. However, gaming machine operating authorities are a third of the price which will be a strong demand driver,” Mr Martin-Henry said.

To view and download the Australia Hotel Market View Q2 2017, another report by CBRE, click the below link. 

To discuss the Australian pub market contact Wayne Bunz or Daniel Dragicevich of CBRE Hotels.

See also:

Byron Bay Beach Hotel sold for $70 million

Asia Pacific hospitality assets remain keenly sought after

Get to know Wayne Bunz​ of CBRE Hotels

Influx of Australian business visitors boosts Brisbane tourism