A weakening pound, growth in staycations and improved infrastructure developments are forecast to contribute to UK hotel investments exceeding 2016 levels by the end of the year, according to two leading hospitality property agents.
JLL and Savills have both reported are increase in hotel transactions so far this year, although their figures vary slightly.
As far as JLL is concerned, there has been a 28% increase in UK hotel investments during the first eight months of the year, the majority (65%) of which have been dominated by single asset sales. With the completion of 57 transactions, worth £1.7b, from January to August, JJL said that total hotel investments during 2017 are forecast to exceed last year’s levels of £3.3b.
Meanwhile, Savills forecasted that annual UK hotel investment volumes will reach £5.1b by the end of the year, which would be 25% up on what they believed to have been the 2016 total of £4b.
By the end of September, transaction volumes had reached £3.5b, up 6.1% on the same period last year, according to Savills.
JLL highlighted that £1.2b worth of deals were completed in London between January and August 2017, 40% up on the same period last year, while Savills reported that overseas buyers have continued to be the major investors in the capital.
Savills also said that overseas investors have accounted for 38% of hotel transaction volumes in the UK regions, up from a 7.3% share in 2016.
Key regional deals completed outside London by JLL included the 298-bedroom Holiday Inn Manchester City Centre, bought by Starwood Capital off a guide price of £55m, and the 174-bedroom Hotel La Tour Birmingham, which was sold to Dalata Hotel Group Limited for £31m. Meanwhile, the 165-bedroom Lowry hotel, Manchester, was sold to Singapore-based group CDL for £52.5m.
Kerr Young, director in JLL’s Hotels & Hospitality Group, said: “Looking forward, developers and operators are likely to focus on regional cities, which are expected to see around 20,000 additional rooms by 2019, due to the high barriers of entry and competing land use in London.
“In Manchester alone, driven by ongoing growth of high quality infrastructure, 1,788 new hotel rooms are expected to be added to the current supply of circa 17,350 rooms by 2019.” The city’s economic growth has been drive by vast investments in high-quality development such as MediaCityUK and Airport City which has continued to have a positive impact on Manchester’s hotel market.”
Rob Stapleton, director in the hotels agency team at Savills, adds: “While some of the increased activity by investors in the UK regions is in response to a lack of available assets and price constraints in London, it also reflects an increased level of comfort among overseas investors with the regional markets, particularly key cities such as Manchester and Edinburgh.”
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