Hotel investment in UK 12% above the 10-year average

UK hotel transactions during the first three quarters of the year reached £3.1b, 12% above the average over the past 10 years. The company’s UK Hotel Investment Q4 2016 report shows that the total number of deals completed by June – 113 – was on par at the same point in 2015 and far outperformed the 10-year average of 60.

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Despite the uncertainty within the economy following the EU referendum, Martin Rogers, head of UK hotel transaction for Savills, said: “Deal activity, in terms of number of transactions, held up on the lead up and after the Brexit result, pointing to continued investor confidence.”

Constraints on availability of property in London has resulted in a boost to activity in the provinces, with the traditionally quiet month of August resulting in the completion of 14 regional deals, compared with five in July. Two of the most significant sales to complete include the Imperial hotel in Torquay to Andrew Brownsword Hotels for more than £10m and Kenwood Hall in Sheffield to Vine Hotels for £6.5m.

Overseas investors are no longer dominating acquisition activity for the first time since 2011, with UK property companies accounting for 34.6% of transactions. Just over half of this can be attributed to the £575m acquisition of the Atlas Hotels portfolio, involving 45 Holiday Inn Express sites and one Hampton by Hilton property, by London & Regional.

Major overseas investment has included the £350m acquisition of the former Grade II-listed War Office in London (pictured) for hotel redevelopment by a joint venture between the global Hinduja Group and Spanish investment company OHL Developments.

It is expected that investment from domestic companies will continue as the weaker pound in the latter half of the year restricts UK property companies from buying overseas. However, at the same time, the recent fall in the value of sterling is enticing overseas investors back to the UK.

Rogers added: “It’s really been a case of two halves this year – pre- and post- the EU referendum vote – that has shaped the type of investor interested in the sector.

“Supply constraints and the strong pound affected the decisions of foreign investors over the first six months of the year, meaning UK property companies are, to date, the most active in the market. As seen over the third quarter, in the coming fourth quarter we expect to see overseas investors make a comeback with them becoming increasingly more comfortable looking beyond London.”

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