NAVIGATE, INNOVATE, 2019 Business Outlook ACCELERATE 1 christie.com 2 NAVIGATE, INNOVATE, ACCELERATE CONTENTS 4 6 8 Managing Valuation & Bank Support Director’s Capital Markets & Business Statement Recovery 10 12 13 Regional Christie Christie Overview Finance Insurance 14 18 21 Medical Care Consultancy- Healthcare 22 26 30 Childcare & Retail Leisure Education 33 36 39 Pubs Restaurants Hotels 42 43 50 Consultancy- International Transaction Hotels Tables 57 58 Venners and Charity Orridge Activity 3 christie.com 2018 was surprisingly upbeat for some. Uncertainty fuelled by ongoing Brexit negotiations only became apparent in the last few weeks of the year as Parliament failed to reach a consensus on how to proceed. CHRIS DAY As ever, consumer confidence is key in driving these markets, which are more complex than Global Managing Director economic and business performance and, in traditional real estate. whilst there have been a number of metrics CHRISTIE & CO and findings to suggest high street spending is falling, this may not be the most reliable Our markets continue to function very method to establish consumer sentiment. As effectively and front end KPIs in transactions, we move towards online platforms, this looks such as interest and offers received, have Managing to be the most indicative way of measuring been robust. However, towards the end of how people are spending their money. 2018 there has been a slowdown within the tail end of some deal processes. As we The highly publicised struggles of big chain Director’s approach the deadline for a Brexit deal, we’ve brands in the casual dining space have cast seen some caution from banks who are doubt in the market, however, the issues really Statement taking longer to provide loans and capital, stem from oversupply rather than a lack of causing a domino effect and slowing some customer demand. Operators who distinguish completions. themselves from the crowd and present a unique offering are thriving, along with those Once we have passed the Brexit deadline, it who continue to reinvest and innovate. This looks likely that with the clarity this will bring, is true across all sectors, where being able we will see transaction times return to normal OVERALL MARKET to adapt, adopt new trends and introduce and in fact possibly a dividend in deals from the boost in market confidence. 2018 was for some, surprisingly upbeat. relevant technology to improve services Uncertainty fuelled by ongoing Brexit and cost-effectiveness will see any business Beyond the UK market, our focus continues negotiations only became apparent prosper compared to those who have failed to to be the growth of our consultancy teams, in the last few weeks of the year as prepare for the future. which are now working fluidly as a pan- Parliament failed to reach a consensus. Continued investment into the UK from European operation, providing a more Nevertheless, we can look towards overseas has consistently shown the cohesive and unique offering for clients on 2019 optimistic that clarity will be attractiveness of our markets, with investors the continent. We have also been building our provided for the UK as we approach the from continental Europe, US private equity European brokerage services and continue March deal deadline. There is no doubt and increasingly Israel and the Far East. The to explore export opportunities from Far we are seeing pent-up demand from level of international interest, capital and East investment into the UK, particularly investors looking to commit to the UK activity in the UK shows no sign of slowing, in childcare, theme parks and intellectual once we have certainty. suggesting that the future will be bright property in China. Generally, the economy has performed for business. Through our Consultancy team, we are as expected and in fact better than some Sectors based on consistent consumer recognised as the go-to adviser in the predicted, with many markets remaining demand, such as those Christie & Co works hospitality and healthcare sectors across robust and the ongoing currency across, are becoming more mainstream and Europe, covering a range of languages, fluctuations continuing to make the UK increasingly attractive to those looking for a cultures and markets. We look to continue to attractive to overseas investors. different kind of investment. As advisers with consolidate our teams and ensure a critical mass of support in our core areas of operation, Another positive indicator of a stabilising decades’ worth of knowledge and expertise particularly in France, Germany and Spain. economy is the recent interest rates in these sectors, our teams are in demand to increase by the Bank of England. help clients traverse the particular nuances in 4 NAVIGATE, INNOVATE, ACCELERATE WORKFORCE BREXIT the larger banks, and there is still plenty of opportunity for funding through smaller Across our sectors, we’ve picked up on Turning attention inevitably to Brexit, banks, Funding Circle, angel investors and two key trends which look to be the most despite much uncertainty and negative private equity. With huge amounts of capital topical for operators and investors to be speculation on the outcomes of various trying to find a home, canny independents aware of; workforce and of course, Brexit. deal scenarios, we can reasonably expect should be encouraged, as venture capital Throughout this edition of Business that once an outcome is known businesses is increasingly looking to support start-ups, Outlook, each sector will touch upon the will continue to prosper. Generally, particularly in hospitality where these are issues surrounding these themes, potential businesses have continued to trade and performing well against an oversupply of impacts and how the sector looks to deal transact successfully, bolstered by solid casual dining brands. However, competition with them. underlying market fundamentals, so we see will continue to be rife across all sectors, no reason for this not to continue in 2019 Staffing and workforce issues invariably and ensuring underlying quality and a solid and beyond. If anything, the clarity a deal differ from sector to sector, but the key concept are key to thriving. brings will only boost confidence in the challenges are recruitment and retention, market. This year’s Business Outlook theme of with competitive pay driving up staff costs Navigate, Innovate and Accelerate applies for many employers. OUTLOOK to how businesses can find their route The hospitality and care sectors are Looking ahead to 2019, the market will to successful growth. Navigating an ever grappling most with this, with the current continue to realign itself along with changing landscape to keep up with nursing shortage and decrease in European consumer demand, and in every sector the political, technological and demand shifts workers due to uncertain immigration quality businesses moving forward with is vital and this can be achieved through policy post-Brexit exacerbating matters. future developments are set to continue to innovation and agility. Being aware of the thrive. New concepts are coming to market market and what needs to be done to meet Businesses that look after their staff, pay all the time and with technology evolving, expectations is key to prosperity. We hope competitively and create opportunities and the time has never been better to capitalise that this year’s report offers support and a culture of feeling valued will attract better on new opportunities in business. insight to allow all businesses across all our quality people, retain these staff, and in turn sectors to be prepared for what 2019 brings. provide a better service ultimately to the There continues to be an abundance of benefit of the business. capital available despite some caution from INDEX BASED ON AVERAGE SALE PRICES From a base of 100 in 2005 140 130 120 110 100 90 80 2005 2012 2018 Hotels Restaurants Care Retail Christie & Co House Price Retail Price Average Index Index Index 5 Dental Pharmacy Pubs Childcare christie.com We anticipate a strong start to the year across many of our specialist sectors, as transactional activity and deal pipelines remain resilient. DARREN BOND We remain extremely optimistic about the Our valuation activity in the medical sector Managing Director demand for valuation services heading remained strong, with a notable increase Valuation & Capital into 2019, following resilient trading in activity in the doctor’s surgery sector, as Markets performance across our markets in the past well as the veterinary and optician markets. 12 months, despite ongoing political and Whilst annual price movements in the economic uncertainties surrounding Brexit dental and pharmacy sectors slowed from negotiations. the very strong growth in recent years, the Valuation price movements achieved in 2018 were still ACTIVITY respectable. & Capital Despite the increase in interest rates to 0.75% in August 2018, the cost of borrowing Christie & Co’s Care Valuation team was Markets remains at an all-time low, as refinancing instructed on a number of valuation projects opportunities remain attractive. This has including Barchester Healthcare, Choice led to strong demand for valuation services, Care Group and part of the Accomplish alongside the increased requirement portfolio. One of the largest advisory for lending institutions to insist on more assignments undertaken in 2018 was frequent revaluations. providing Four Seasons Health Care with strategic consultancy advice on 180 care The hospitality market, in particular, remains assets, as part of the ongoing restructuring very active, especially the public house of the group. and hotel sectors, despite the continuing pressures of increasing operating costs. The Activity in the retail sector was also strong, number of pubs closing in the UK has slowed alongside our transactional work on Wyevale following decades of rapid contraction. Garden Centres. Notably, we undertook The cost of a valuation of a portfolio of almost 350 Our Hospitality Valuation team has received petrol stations in the UK, on behalf of TDR borrowing instructions on a number of significant Capital-backed Euro Garages, who were remains at an national pub portfolios.