2017 was a record year for European hotel investment as transaction volumes reached a record high of €21.6 billion, according to the latest data from leading global real estate advisor, CBRE. This represents a 16% increase year-on-year, on the 2016 total of €18.6 billion. 2017 also surpassed the previous peak set in 2015, of €21.2 billion.
The UK registered the highest actual investment volume of all the European countries at €6.2 billion, up by 39% year-on-year. The growth was driven by the sale of nationwide portfolios and major single assets; notably the sale of the Hilton Metropoles, the Jurys Inn Portfolio and QHotels, as well as major single asset deals including the JW Marriott Grosvenor House.
Several European markets witnessed an exceptionally higher level of investment activity including the Nordics, Spain, Italy and The Netherlands. The Nordic hotel investment market doubled in size in 2017, representing a 101% increase year-on-year to post €1.5 billon. Spain continued to see strong investment appetite and posted a record-high volume of €3.7 billion in 2017. The Netherlands also saw a notable uptick and registered €1.4billion, up by 81% year-on-year and €1.3 billion was invested into Italy, up by 16% year-on-year.
Kristen Kozlowski, Head of Hotel Investment Properties, EMEA, commented: “As strong revenue and profitability growth across Europe has driven hotel values upwards, the lack of yield in other asset classes has rallied investors around the sector. This, when combined with the increasing transparency of hotel market data, the growing number of trusted third-party hotel operators, and the increasing availability of leases, has brought new global institutional investors to the market. This is besides traditional European hotel investors, who continued to increase their investments in the hotel sector in 2017 and a trend that is likely to continue in 2018.”
Hotel vacant possession and management contract yields across key European cities largely held stable in Q4 2017. However, throughout 2017, yields for leased assets compressed by as much as 50bps in Germany and Ireland.
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