The nightclub sector is mostly comprised of independently-owned or smaller multiple operators, with a limited amount of corporate ownership. Nightclubs can be subdivided into a number of categories:
- super clubs;
- mid-sized clubs;
- small clubs; and
- chameleon clubs.
In recent years the nightclub sector has not only been adversely affected by the changes in the licensing regime but has also suffered as a result of changing social trends.
Licensed premises, including nightclubs, are generally bought and sold by reference to their trading potential as the motive of the operator and purchaser is to trade from the premises to realise its profit potential. Consequently, valuers compare and value premises on a trading/profit-related basis.
On 20 March 2020 pubs, restaurants and hospitality premises were ordered to close by the UK government in response to the COVID-19 crisis, and have only been allowed to reopen with appropriate social distancing rules from Saturday 4 July. During this period, the government offered support to the sector through various initiatives, including the Coronavirus Job Retention Scheme, VAT relief and an interest-free business loan scheme among others, in an attempt to mitigate the economic impact on the hospitality industry caused by the lockdown.
At the time of writing in September 2020, the nightclub and late-night sector continues to be a particular concern, with no clear guidance as to when it can reopen. There are fears that without further support and a clear timeline for reopening, many nightclubs and late-night businesses will not reopen and are likely to close permanently.
In the current climate, great care and caution should be taken when considering and undertaking valuations of nightclubs or late-night premises for capital or rental purposes. Once the picture becomes clearer, further valuation guidance will be provided.
Valuers are directed to consider RICS’ Valuation practice alert – June 2020, which includes guidance on material valuation uncertainty.
Related RICS standards and guidance: Red Book VPGA 4 Valuation of individual trade related properties
Related template: Nightclub valuation checklist
Related feature: Valuing trading potential