General consensus among industry professionals at the UK Leisure Property Review of 2008 this week was that the leisure industry will be more resilient to the economic downturn than other industries.

In a key note speech on the investor market, James Welch, of chartered surveyors Sibel Welch, said that as the leisure industry didn’t get carried away during the boom time, he believes it is better positioned to weather the economic climate compared to other industries that did. He added that leisure services are expected to be the first thing people will start spending their money on when prices for necessities start to decrease. Jones Lang LaSalle (JLL) hosted the seminar – the latest to be organised by the Leisure Property Forum – at its headquarters in London. The seminar, which brought together industry operators, lawyers and developers, recapped on the state of 2008 for the occupiers' market (by Rob Howarth of Jones Lang LaSalle) and the investors’ market (Welch).

According to JLL, cinemas have had a strong trading performance in 2008 with the major players – Odeon, Cine UK, VUE and Showcase – fairing well with box office sales due to films such as Mamma Mia and the Dark Knight. Footfall had also increased with 164 million admissions in 2008, compared to 162 million in 2007. However, 2009 is expected to be difficult for new openings as although operators still want to expand, the availability of funds and development slowdown will be an issue. Developers are, however, realising the crucial benefits of a night time anchor such as a cinema. Rental growth remains static.

Ten Pin Bowling is having a tough time, as are other sectors, but according to Howarth in October 2008 the sector “fell like a stone”, partly contributed by more cinemas moving into town centre developments and providing limited opportunities for bowling alleys. According to JLL it is mainly the upper end of the restaurant sector which is suffering, the bottom end chains such as McDonalds, Dominos, Pizza Express and buffet restaurants are offering good value for money and are proving resilient.

The middle market, however, is surviving on 2 for 1 deals but the big question, according to JLL, is what will happen to like-for-like sales once these offers are over? On average, 36 pubs closed each week during the first half of 2008, and towards the latter end of the year the figure rose to 39 per week for the licencsed trades. Beer sales dropped by 9.9 per cent and there were 1.4 million fewer pints being pulled a day.

Traditional pubs which cannot merge with, or turn into, gastro pubs are the businesses most likely to be forced to close. There has also been an increase in gastro pubs trading with pub cos. According to Howarth, the casino sector was a “non entity” in 2008 and had suffered from appaulling trading conditions. A mere sixteen new casino licences were confirmed during the year and only Solihull and Newham have so far issued a timetable for the licences. JLL posed the question: Who will actually pursue the new licence this year under the current conditions?

The bingo sector also had a quiet year, with most property transactions involving operators offloading sites. Health and Fitness Industry is seeing a rise in the 'Super Budget Gym' with more clubs offering no-frills and £15 a month membership deals. JLL believes January sales will be critical for the sector’s 2009 prospects.

According to Welch, 2008 has seen an increased desire to sell property rather than to make profit. Also a lot of asset management initiatives were shelved, making 2009 about preserving income. Compared to January 2008, January 2009’s prime leisure investment yield for city centre sites is 5.5 and 7.75 respectively and 5.74 (’08) compared to 8.25 (’09) for out of town sites.

Responding to a question whether it was a good time to buy property, Welch said: “No one really believes we will move out of this [economic downturn] until the third quarter of 2009. But some investors do have money and if they wait until the third quarter it could be too late.” The next seminar, called Financing the leisure sector – where do we go from here, will be held by Grant Thornton LLP in London on Monday 9 February. For details contact [email protected]