Rising property prices are causing hotel development in London to shift eastwards, according to a new report published ahead of the 2013 International Hotel Investment Forum (IHIF) which opens today in Berlin.
The Changing Outlook for Hotel in London, produced by independent commercial property consultant GVA, highlighted that the largest concentration of the city's future hotel supply has moved to the City, Canary Wharf and Stratford from the traditional central hotspots of the West End.
A sharp increase in land values in Mayfair, Knightsbridge, Kensington, Chelsea and Bayswater has resulted in many operators in the mid-range and budget sectors to look elsewhere to develop new hotels.
More than 25% of London's future supply of 26,200 bedrooms with planning permission or under construction is in Tower Hamlets, Newham and the City.
The locations with the largest pipeline with planning consent or under construction are the City (2,428) and Tower Hamlets (2,608), while the figure for Westminster is 2,246.
Ian Thompson, director of valuation at GVA, said that he expects that the hotel growth in the merging London markets will be driven by UK investors, while overseas investment will continue to be concentrated in the area between Kensington and Canary Wharf. "Overseas investors are likely to be the follow-on purchaser, such as the recent acquisition of hotels at Westfield's Stratford shopping centre by an overseas buyer."
With good transport links having always played a key role in the location of London hotels, GVA estimates that the development of Crossrail in 2018 will add an additional £5.5b to property values along the route and further impact the shift within the city's hotel market
However, the report concluded that the West End will remain "a key market… and will continue to attract leading hotel brands" and suggested that Oberoi and Kosmopolito are just two overseas hotel groups looking to gain a foothold in the London market.