The marina market is proving more resilient than most in current conditions.

The marina market is not immune but has proved to be more resilient than most leisure sectors to the worst effects of the recession and the challenging conditions being faced in 2011.

New boat sales are slow whilst brokerage of boats is surprisingly strong with many boats still being acquired by overseas brokers, taking advantage of our relatively weak pound. This is a concern to the marina sector as the combination of the two results in a net reduction in the UK boat stock. Visitors at Southampton Boat Show were down 9% on 2010 and as usual there were mixed reports from exhibitors.

Falling boat numbers and the search for value - moorings or secondary sailing waters - has lead to a fall in berth occupancy across inland and coastal marinas, with certain areas of the inland waterway network, where new developments have come on stream, experiencing more severe oversupply of berths. On the whole, however, the drop in occupancy has been gradual and containable, with much tightening of belts.

With this background it can be seen that for most profitability will have fallen and as values are related to trading we would expect to see a drop in values. Hard evidence for the effect on values is scarce with very few significant transactions over the last two years. This absence of deals is more an indicator of the lack of supply rather than demand with a broad range of buyers still keen to enter the sector.

On the coast the buyers tend to be existing operators and occasionally private investors. Over the last 15 years or so one of the most acquisitive coastal marina buyers has been Premier Marinas, now with over 5,000 pontoon berths. This marina group has since 2005 been 94% owned by Blackrock UK Property Fund, which sees marinas and other alternative real estate as a key part of its strategy to provide diversification against traditional property sectors. We are aware of other real estate funds which are keen to enter the sector but often struggle to accept the low yields that apply to what in property terms is a management intensive business. Buyers need to remember that marinas, especially new developments, are a long term investment and have shown income growth well above inflation.

Over the last 2 years the significant marina deals have included the following:

• Quay Marinas acquisition of Portishead Marina (285 berths) in the Bristol Channel
• Sale of Great Haywood Marina (200 berths) on the Trent & Mersey Canal and Tattenhall Marina (300 berths) on the Shropshire Union Canal to Lakeland Leisure Estates
• Land & Water's sale of Saul Marina (285 berths) on the Gloucester and Sharpness Canal

Strutt & Parker acted on all these transactions as shown in this case study.

What's happening in the marina sector in 2011?

• Strutt & Parker's sale of Stone Pier Marina and Boatyard at the mouth of the Hamble generated huge interest and is now under offer.
• The 150 acres of Bembridge Harbour on the Isle of Wight, which failed to sell last year, is now in receivership and on the market.
• British Waterways is well down the road to becoming an independent national charity which it is hoped will attract new funding for the maintenance of the waterways. The new trust, Canal & River Trust, will take responsibility for the 2,000 miles of waterways in April 2012.
• Meanwhile BW's marina trading subsidiary BWML has acquired the 116 berth Cowroast Marina on the Grand Union Canal.
• In August AIM-quoted Camper & Nicholsons Marina Investments announced the end of its strategic review, which could have resulted in a sale of the company. The group has built up an eclectic mix of marina interests around the world from Grenada to Malta. FE Marina Investments Ltd, part of the First Eastern Investment Group has invested £4.2m in the company and formed a new joint venture to pursue marina opportunities in Asia and the Far East, including China and Hong Kong.

From our experience the market for marinas has widened significantly over the last 5 years and will continue to do so as more and more investors begin to appreciate the opportunities for real growth in the sector and the resilience of the cash flow.

For further information or to discuss any other leisure property matter please contact Colin Crosthwaite on 0207 318 4632.