Specialist business property adviser, Christie & Co, recently launched its Business Outlook 2024 report, which reflects on key business themes, market activity, and a look ahead at what 2024 may bring across the sectors in which Christie & Co-operates; including leisure, hospitality, childcare & education, healthcare, retail and medical.
Christie & Co reports a 20 per cent decline in transaction volumes in 2023 off the back of a high inflationary environment, as sellers held out for pricing and buyers adjusted for expected increased operating and financing costs.
2023 was largely dominated by several significant multi-property disposal campaigns for corporate operators, who sought to dispose of their poorer performing assets. Bringing to market packages of between 25 and 100+ properties for sale on an individual or sub-group basis has realised strong outcomes in a market where independent and regional buyer appetite remains very positive.
Due to inflation, rising costs, and many professionals suspending their acquisition plans as a result, average prices of businesses transacted by Christie & Co decreased by an average of 3.5 per cent in 2023, with the exception of the retail sector which increased by 0.4 per cent .
Average sale prices across each sector in 2023 were as follows:
Dental: minus 6.4 per cent
Pharmacy: minus 4.6 per cent
Care: minus 0.4 per cent
Childcare: minus 3.3 per cent
Retail: +0.5 per cent
Pubs: minus 8.1 per cent
Restaurants: minus 5.3 per cent
Hotels: minus 4.1 per cent
Key Impacting Themes
In 2023, Christie & Co continued to see an increase in operational costs and inflationary pressures, and the increase in the National Living Wage is only expected to enhance these pressures across the board. While some sectors have offset rising costs onto consumers, with price increases of up to 25 per cent as seen in the restaurant sector, this will undoubtedly continue to create significant pressures on the bottom line for businesses in 2024.
As we move further away from the pandemic, there has been a renewed focus on sustainability issues, particularly within the medical sector, where both the BDA (British Dental Association) and NHS are working to establish sustainable guidelines and ESG standards for dental practices and pharmacies. In other sectors, a focus on cost pressures has superseded these ESG initiatives, however, many businesses recognise the long-term financial value of implementing solar power and self-sufficiency measures.
Market Sentiment and Distress Levels
Christie & Co also reports an uptick in distressed activity, which is expected to increase further in 2024. In 2022, circa 3 per cent of all sales were categorised as having some form of distress and, by the end of 2023, this figure had tripled, to 9 per cent. Additional financial support from the Government, which was available through the pandemic and beyond, has fallen away and it appears there has been a lag effect, with the anticipated rise in business failures coming through in 2023.
Market sentiment for 2024 has improved in comparison to expectations for 2023. According to data from Christie & Co’s annual sentiment survey, 46 per cent of sector professionals have reported they feel positive for the year ahead, and 75 per cent reported they plan to buy or sell in 2024.
Stephen Jacobs, Director – Bank Support & Business Recovery, comments, “In 2023 we saw a material increase in distressed operational real estate particularly from Q3, with our business property sale mandates 75% up on the prior year and accounting for 10% of all our sales mandates, up from 3% in 2022. We expect the upward trend of business distress to continue during 2024, and for this to extend beyond SME’s to the mid-market.”
Darren Bond, Global Managing Director at Christie & Co, comments, “After starting to see business return towards more normalised levels following the pandemic, 2023 stuttered on the back of the high inflation and a further five increases in interest rates. We do, however, expect to see a more positive turn in 2024, with our sentiment survey revealing many operators have active acquisition or sale plans for the year ahead. In our European teams, we see further growth opportunities to add more specialists in Austria, France and Spain over the coming years.”
