London…the world’s top city for hotel investment

According to Cushman & Wakefield London is currently the world’s most popular city for hotel investment. Overcoming Brexit uncertainty, the figures suggest that investors are confident in London’s long-term growth prospects and with a high number of institutional investors in the market right now, there is a reduced risk profile and surge in liquidity. 

London’s position as the world’s top city for hotel investment is due to the phenomenal amount of investment activity seen in 2018 with a total investment volume of £7.4bn, 102% above the 12-year average of annual hotel investment activity of £3.7bn. According to PwC overseas investors made up the majority of buyers at 78% due to growing confidence and strong demand, which out-priced domestic buyers. 

The acquisition of hotel sites and the forward funding of hotel projects equated to 21% of total investment in London in 2018.

Also significant is that HNW Family Office investment, UK institutional investors and Overseas Hotels Focused Investment Groups last year had the highest net capital inflows of all investor types, each with approximately £1bn of investment. 

Can London keep the top spot?

So far in 2019 the London hotel market has seen record occupancy levels with the weak pound supporting both the tourism and hotel markets. However not everyone is optimistic that this trend will continue, I have read reports where some industry experts are worrying that demand will dip throughout the rest of 2019 due to Brexit uncertainty, weaker corporate travel trends and the fact that no large-scale events are scheduled for this year. Also, new supply in London is forecast to increase by 4% in 2019, which will take time to be absorbed by consumers. I however think that the weak pound will remain so throughout the rest of the year, driving tourists to London and keeping occupancy and demand high.

With all the new stock coming to the market, one interesting trend I think worth noting is the increasing number of conversions from retail spaces to hotels. Analysts sensibly suggest this is the result of the struggling retail sector along with a shift in consumer spending towards ‘experience’ activities. Of course budget airline carriers also play their part. 

Notable New London Hotel Openings

  • The Great Scotland Yard Hotel, with 152 luxury rooms, is due to open in late summer this year. It’s owned by Twenty14 Holdings, the hospitality arm of Lulu Group International, who entered into a £110m forward purchase agreement with Galliard Group. 
  • Treehouse Hotels, a new hotel brand by Barry Sternlicht (owner of St Regis and W Hotels) will open its first property in Portland Place later this year. 
  • The Biltmorein Mayfair is set to open this summer. The hotel will have 257 luxury rooms and 51 suites.
  • A new eight storey, 200-bed Hoxton Hotelin Shepherd’s Bush was recently approved by Hammersmith and Fulham Council’s planning committee. 

Current Hotel Investment Opportunity

ambT Property Partners has taken an instruction from a very experienced hotel developer whose team has been involved in over 500 hotel transactions throughout the UK. The delivery team has a pipeline of development opportunities totalling 1500 hotel beds in prime city locations and a GDV of over £400m and a funding requirement of £325m. 

We are therefore looking for a strategic partner to participate in bringing these assets to the market and for those that wish to build or add to their portfolio, this represents an excellent opportunity to enjoy a JV profit share and significant annual income. If this is of interest to you please contact me via Michael.d.oliver@ambtpropertypartners.com for more information. 

If you enjoyed this article, please leave a comment and let me know.

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