The pub market in both NSW and QLD has shown robust results over the 2018/19 Financial Year, with over $1 billion changing hands across the two states.

The desire to invest in these assets is at an all time high, reflected in the push into assets outside of Metropolitan Sydney, most notably in the Coastal regions of NSW, said HTL Property.

At a glance:

• In NSW, there was a strong run to the end of the 2018/19 Financial Year with over $300 million changing hands in 2Q 2019. The landmark sale of the year was the Hotel Steyne - changing hands for $62.5 million.
• Over $860.56 million was transacted in 2018/19, with Metropolitan assets remaining in highest demand and the greatest growth in activity coming from the Coastal market.
• While ranges have contracted, average yields have remained relatively steady over the last couple of years, with Coastal assets showing the greatest change.
• In QLD, tightly held assets have resulted in 2018/19 Pub sales only reaching $223.50 million across 22 transactions.
• Investment yields continue to be competitive for the QLD Pub market, remaining steady over the last 12 months.
• Financing has been the major hindrance for investors in the QLD market; however as interest rates move downward, there is scope for greater demand which will likely pressure yields.

"This move up the risk curve has highlighted a tightening in investment yield, echoing the sentiment by many commercial investors regarding the attractiveness of these assets. This is based largely upon their wide spread to bond rates, particularly given the recent and likely continued interest rate cuts."

North of the border in QLD, owner’s have tightly held assets keeping volumes down and interest levels high. Yields remain within a broad range, however increased competition is likely to provide further downward pressure.

Looking to the future market landscape, the report said that market movements, with yields being the lead indicator, are fundamentally predicated upon supply and demand within each market segment.

"From a supply perspective the market, especially for A-grade stock in both Metropolitan and Regional areas, will continue to be tightly held; as the ability to replace the return, particularly in a low interest rate market, is hard to come by. This will only continue to have a contracting effect on yields," explained HTL.

"From a demand perspective there has been a sharp increase in enquiry in the weeks following the Federal Election, and we expect this to continue throughout the next 12 months. The lending environment is liquid for those well capitalised operators with proven operational experience; and clearly the rates at which capital can be currently borrowed, is at an historical low."

HTL Property is buoyant about the current market, its reliability and health; as well as its continued broad attraction as an investment grade asset class.

Click here to download the HTL Property Spotlight on NSW & QLD Pubs 2018 / 2019 Fin year

For more information about the report phone or email Andrew Jolliffe Director of Asia Pacific Region or Dan Dragicevich National Director HTL Property via the contact details below. 

See also: 

CBRE release their 2019 hotel market outlook research report

Australian hotel sales total $1.8 billion in 2018 - Colliers International Report

Gold Coast shines as Australia's top hotel market for 2018 - CBRE Hotels report