2020/NO.34 - Good to be able to finally start trading from 4th July with the hopes of great weather and full use of the many pub trade gardens. One thing we do at Morgan & Clarke is a huge amount of background research bringing together technical, legal and financial thinking and data. This helps, but never totally solves future forecasting as required by the RICS Guidelines 67/2010. Particularly the thorny but essential FMOP (Fair Maintainable Operational Profit). This requires the consideration of what happens in the future to influence trade. Too many POB valuers are guessing at a rapid return to normal. We don’t think so.
On the positive side, trade resumes at last rather than the stop gap of takeaway food and drink. More positives in the relaxation of external drinking on pavements for urban pubs (Newsletter ‘Pavement Drinking’ refers). But as for having to be seated in a bar with no vertical drinking, that really is entering unknown territory. Do you have exclusive use of say a six seater table or is that table capable of being shared. Moveable plastic screens? Full time retention of toilet monitoring, one metre distance from the bar, ordering by app. Limited food menus. Only time will tell.
What we do know is the numbers as confirmed by both the Institute for Fiscal Studies and the Resolution Foundation Think Tank. Both are running pretty much in the same direction predicting that unemployment will probably reach 10% with the shutdown having hit the less well off households the hardest. The wave of unemployment is unprecedented in recent times and will happen with the phasing out of the job retention scheme on 31st October. Then link up with the squeeze on household finances and the speed of recovery in the hospitality world will be challenging to say the least. All of this links into a conservative view to be taken which the month of June has laid the foundations for some cautious optimism. No, life will not return to pre Covid levels witnessed prior to March 23rd for a good few years in our researched opinion.
Finally we have the reality of how you infuse the future forecasting into rent valuation. No question that the mindset of the ‘Willing Tenant’ would fully understand the caution that must be taken in a five year rent review pattern, especially if it is also index linked. Whether trade valuers for the POBs are prepared to be sensible is another matter. Best evidence is that on the ground rather than theory. That will happen after the binge weekend of 4th July when things settle down a little. Come winter who knows, but we are forever confident that the market will try it’s uttermost to make the best of still trying trade environment.