The good ol’ Aussie pub is back.
After some years of neglect and a lack of lustre, according to some, pubs are again being viewed as a viable entertainment options for punters of all shapes and sizes, and as a result: a viable option for investors.
The stunning $100m sale of the Beach Hotel in Byron Bay late last year, has heralded a new era of interest in pubs.
And the song Pub Feed from cult Aussie rock band The Chats confirms it.
The record-breaking sale of the Beach Hotel, the first time the three figure mark has been broached for a drinking venue, has shown the new respect with which pubs are being treated by buyers. The entertainment destination in the holiday mecca is now being managed by the ASX-listed Moelis Australia Hotel Management.
In Newcastle, well-known Sydney hotelier Andrew Lazarus said he was determined to “do everything possible” to get his hands on the Beach Hotel in Mereweather – another iconic beachside venue.
“The potential of The Beaches appealed to me. It’s the only beachside pub in Newcastle, and people love being waterside,” he said.
The popular venue at 99 Frederick St, owned by the Bale and Twohill families for over 40 years, had price expectations of $20 million plus.
The Alliance Hotel in Spring Hill in Brisbane is another location that has caught the eye of investors.
Commercial and Site Acquisitions Manager Tas Costi from Buyers’ Agency Cohen Handler says there are a number of reasons for the renewed interest in pubs.
“We are seeing a lot of high net worth individuals looking for somewhere to put their money,” he said.
“And many of them are looking to pubs and similar venues to do just that.”
“Pubs can provide a good cash flow and the rates of return are much better than residential.
“For example in many places your residential rental return will be around two to three per cent but it is more towards a four to five per cent return when it comes to commercial.
“Investors are looking to diversify and this can be a good way of doing that.”
Mr Costi said the uncertainty of the stock market and low interest rates also make pubs an attractive investment.
According to respected analyst IBISWorld, a lift in consumer spending, more flexible opening hours for venues and the winding back of regulations, such as the lockout laws, are likely to increase industry demand over the next four years.
Many pubs can offer a number of differing revenue streams, so if perhaps one is struggling the other might pick up the slack.
“They are not just a one-stop shop,” Mr Costi said.
“You could pick up the local market and the tourist market, if it’s a landmark or if it’s situated in a coastal area that is also going to appeal to a wide potential clientele. You can have a restaurant at the back, a sports bar and income from poker machines so there can be a lot of opportunity there.”
Like residential property there can also be the possibility of significant capital gains to be made via pubs through renovation or refurbishment.
“There is the potential to make money through renovation but also the chance to reposition the business,” Mr Costi said.
“Put in a top class restaurant, they are starting to pop up in pubs and are really taking off. Do up the back area, turn it into an iconic place, a venue with a high turnover, have sit down food at the back and order other faster food at the front. There is so much potential.”
Mr Costi pointed to one of Merivale’s latest projects Totti’s in Bondi as an example of a good pub renovation and reposition. Justin Hemmes has transformed the tired Royal on Bondi Rd into an exciting new venue.
However it’s not as simple as throwing some money around and hoping for the best.
“You need to keep things attractive, you need to keep up demand from the gaming areas, through the restaurants to the bottle shop,” Mr Costi said.
“It’s not just a case of buying and earning your return. Publicans know what they are doing and you have to know your market. Justin Hemmes has been doing it for many years, picking up run down assets and revitalising them. But’s he’s good at it and he knows how to do it well.”