Pub companies switch more units to leases

By Chris Druce

Tenanted pubs are increasing their stranglehold on the pub sector with operators abandoning direct management in the face of spiralling costs, according to industry experts.

Bedfordshire brewer Charles Wells's announcement last week that it would convert its last 15 remaining managed pubs to leaseholds follows the trend in the sector, which is dominated by tenanted pub giants Enterprise Inns and Punch Taverns.

James Shorthouse, director at property agents Christie & Co, said conversion to leasehold was being driven by two factors: "The willingness of good-quality operators to take on bigger sites, and the high cost of running smaller managed houses."

Jon Lake, director of corporate finance at Deloitte, said the shift would continue as groups wrestled with utility and wage increases outstripping sales growth.

"I think we'll see managed to lease conversions continuing as operators such as Greene King and Wolverhampton & Dudley Breweries shuffle their portfolios. However, Punch's decision to put 249 Spirit pubs up for conversion to lease probably represents the last of the big package deals."

The UK Public Houses Market Development Report published in April 2005 predicted that by 2008 there would be just 8,435 managed pubs representing just 14% of the total 60,000 pubs, compared with 25% now.

BOXTEXT: The decline in managed pubs

BOXTEXT: 2001: managed 12,700; tenanted 29,000

2003: managed 11,300; tenanted 29,500

2005: managed 10,800; tenanted 29,900

(Figures do not include independents)

Source: www.mbdltd.co.uk