- Hotels, pubs and liquor stores are becoming popular commercial investments
- The liquor retailing sector in Australia is growing by 4.6% annually, to $15.5 billion
- Licenses are hard to get and are not easily transportable
The liquor retailing sector in Australia is growing by 4.6% annually, with a total value of $15.5 billion in 2021, according to IBIS Worldwide.
With the disruptions of the past year moving investors into naturally defensive assets such as retail, fuel and childcare centres, the “new darling” of the commercial sector are hotels, liquor stores and pubs.
This may seem surprising in an era of lockdowns and interruptions to the hospitality industry, but with more people stuck at home, they will not stop buying alcohol. And when hotels and pubs have re-opened, they have been inundated.
“Liquor and pubs are some of the most sought-after classes of commercial property.”
“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.”
Michael Gilbert, Burgess Rawson’s Director of Sales in Sydney
Melbourne Director Jamie Perlinger agreed that the sector had performed well during COVID despite the various intermittent closures, with the sector bouncing back remarkably.
“In February, Woolworths announced a 335% rebound in the ALH Group half year profit and a 24% increase in Dan Murphy’s and BWS profits (H1 FY21 compared to H1 FY20) demonstrating that the diversification succeeded and now – together – they can prosper through a pandemic,” he said.
In the same month, Australia’s largest hotelier and liquor retailer Endeavour Group reported a 10% increase in half-year revenue despite all the disruptions.
Endeavour Group was the result of the merger of Woolworths’ Liquor business, anchored by Dan Murphy’s and BWS, and their pub business, ALH Group. Sales are $10 billion with EBITDA of $1 billion. The group is 85% owned by Woolworths.
“Go back 20 years or so, Woolworths and Coles’ entry to the pub market was the ‘multiplier’ for their respective liquor businesses,” said Mr Gilbert.
“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.”
“In the specific case of hotels, these high-profile locations are tightly held. Licenses are incredibly hard to get and are not easily 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.”
Jamie Perlinger, Melbourne Director, Burgess Rawson