Thirst for liquor market
Without a doubt, commercial property has been the investment class of choice during the disruptive economic conditions of last year. Investors are diversifying their portfolios to include investments with defensive qualities like retail fuel and childcare. However, there is a new darling of commercial property investment – hotels, pubs and liquor.
“Liquor is one of the most sought after classes of commercial property,” said Michael Gilbert, Burgess Rawson’s Director of Sales in Sydney. “Investing in commercial property is not just investing in the physical property but the tenant as well and in the case of liquor and pubs, Australian brands are rock solid.”
Research firm IBIS Worldwide has calculated that the liquor retailing sector in Australia is growing by 4.55% annually, to a total value of $15.5 billion in 2021.
“Figures this appealing are attracting plenty of interest from investors,” said Mr Gilbert. “Offering benefits such as ASX-listed tenants, triple net leases and strategic locations, it is easy to see why.”
Melbourne Director Jamie Perlinger agrees stating that the sector performed well during COVID and despite pub and hotel closures at various stages of lockdown, the sector has bounced back remarkably.
“Take Endeavour Group for instance, who quickly returned to profit after the impact of COVID,” said Mr Perlinger. “Endeavour’s merger with the ALH Group meant any drop in pub revenue during the pandemic was offset by an increase in liquor retail sales. Half yearly results showed a 24% profit in its Dan Murphy’s and BWS business demonstrating that the diversification succeeded.”
Mr Gilbert added that Queensland regulations have also changed the landscape of the sector. “Retailers are unable to operate a bottle shop in Queensland without a pub license,” said Mr Gilbert. “Consequently, most Queensland Dan Murphy’s and First Choice stores are located on hotel sites.
“Woolworth and Coles’ entry to the pub market was the “multiplier” for their respective liquor businesses.”
The year ahead looks just as buoyant for the sector, as it continues to innovate and diversify.
“We are seeing liquor brands diversifying their product offering and pubs have future proofed their business so they can adapt to changing market conditions,” said Mr Perlinger. “Hotels are offering online capabilities including pre ordered meals and delivery services,” said Mr Perlinger. “We will also see retailers continuing to expand their network this year.”
While the market continues to grow and innovate, and consequently attract more attention from savvy investors, Mr Gilbert says stock levels remain low.
“In the specific case of hotels, these high profile locations are tightly held. Licenses are increasingly hard to get and are not transportable which underpins both the land value and the ongoing security of the investment. In terms of long term returns, l really think this is a sector to watch in 2021.”
Interested in liquor or hotel investments? In the current portfolio, we have several fantastic liquor and hotel investments in New South Wales, Victoria and Queensland.