The cinema property type has been transformed over time. In the pre-television era, the 1930s saw the mass development of grand ‘picturehouses’ across the country. The insatiable growth of US-style multiplex cinema outlets, first introduced in 1985, has led to the closure of many so-called ‘traditional’ cinemas, which have either been converted to a variety of other leisure uses or lost to residential or commercial redevelopment. However, a significant stock of traditional cinemas still remains. More recently, smaller ‘boutique’ cinemas have begun to emerge to complement the stock of traditional and multiplex operations.
Therefore, it is important to differentiate between traditional, multiplex and boutique-style premises when undertaking a cinema valuation. Capital valuations relating to each type of premises are discussed, along with rental valuations for both multiplex and traditional cinemas.
Like all leisure and hospitality businesses, the cinema sector was hard-hit by the government’s enforced closure during spring/summer 2020 following the outbreak of the coronavirus pandemic. As of August 2020, many cinemas had not yet reopened, and those that have are subject to health and safety measures that reduce capacity due to social distancing measures and adversely impact on the customer experience with enforced wearing of face masks, restrictions on bar and concessions sales, etc.
It is not yet known when such measures will be lifted, allowing trade to return to normal and whether, in the longer term, COVID-19 might result in a permanent change in customer visitation habits that adversely affects underlying performance.
In addition, the enforced closure of cinemas around the world brought about a greater tension between filmmakers and film exhibitors, with certain films being released straight to network channels rather than respecting the previous ‘window’ that gave cinemas exclusive rights to exhibit.
Again, the long-term impact of this is not yet known but logic suggests that the position of the film exhibitors might well have been permanently weakened.