European hotel investment soars 30% in 2014 - CBRE

Hotel investment volumes across Europe and the Middle East reached €16.8 bn in 2014, an increase of 30% compared to the previous year, according to the latest data from CBRE Hotels.

Investment activity in nearly all European countries was significantly higher in 2014 than in 2013. Scandinavia, Germany and Southern Europe generated the region’s strongest growth with volumes, increasing by 89%, 74% and 50% respectively year-on-year.

In line with tradition the three major markets in Europe - the UK, Germany and France - accounted for the bulk (62%) of reported volumes.

The UK continued to attract the highest levels of hotel investment activity, taking a 36% share of investment volumes. This was supported by large portfolio deals including the QMH portfolio bought by Marathon in August and the LRG portfolio purchased by Kew Green, a trend the broker says is likely to continue in 2015.

GERMANY SURPASSES FRANCE
Germany captured the second-highest share of European investment activity in 2014, changing position with France. Investment levels surged throughout 2014, reaching €3 bn despite a slight slowdown in trading growth across some gateway cities. International buyers were the most active and despite a quiet first half of the year, investment activity heightened significantly in the closing two quarters initiated by the sale of the 342 Hilton Frankfurt.

Investment volumes in France declined in 2014 compared to the previous year, largely due to a notably strong 2013 when a number of top-price assets were acquired. 2014 also raised some concerns over declining revenue per available room (RevPAR) particularly in the capital, Paris, largely due to austerity measures implemented in France and the related impact on corporate and consumer demand. Nonetheless, Paris remains the highest RevPAR performing market in Europe.

Joe Stather, information and intelligence manager for EMEA at CBRE Hotels, commented: 'The European hotel market has reflected a trend visible in the wider commercial real estate landscape which is benefiting from low interest rates and cyclical upturns. More specifically, hotels as an asset class are currently presenting yield premiums significantly above traditional real estate segments such as office and retail, even across prime locations. More investors are becoming aware of the opportunity for strong returns in the sector and increasing transparency is aiding confidence.'

The broker expects to see heightened investor appetite to deploy capital into the hotel arena throughout 2015.

He added: 'Whilst demand will further intensify from typical sources of capital, we are also likely to see increased interest from Asian investors following a relaxation of cross-border investment restrictions and their preference for purchasing quality hotel stock in Europe.'