The European Hotel market has eclipsed the €20bn threshold of investment predicted in 2015 by €2.8bn (totalling €22.8bn), an increase of 79% year-on-year. The fourth quarter saw 31% (€6.946bn) of capital allocated to hotels, an increase of 101% versus Q4 2014, with Western European markets leading the activity, reports CBRE Hotels.
The sector is now set to transition into mainstream property investment after the hotels share of European real estate investment has increased by 6% since the last market peak in 2007. Recent confidence has been fuelled by the strength of the sector across many of the key Western European markets, in particular, the UK with €9.3bn of investment in 2015 (+134% Y-o-Y), Germany €4.4bn (+47% Y-o-Y) and France €2bn (+96% Y-o-Y).
Dominic Murray, head of EMEA brokerage, CBRE Hotels said: “A heightened allocation of capital into the sector has led to strong pricing and yield contraction against a backdrop of operating performance recovery. Hotel operators are finding the opportunity to drive average room rates owing to robust levels of occupancy and continued growth in demand.”
In 2015, EMEA attracted more inward real estate investment from overseas capital than any other global market. North America was the biggest source of investment in the real estate market in 2015, spending €69bn. Capital from North America, mainly deployed by private equity funds, represented 35% of European hotel investment during the last 12 months – typically targeting value-add opportunities.
Joe Stather, information and intelligence manager EMEA, CBRE Hotels, commented: “Should the momentum be carried through into 2016, then transaction volumes could be set to repeat rather than exceed due to the limited availability of stock – a constraint that has been exacerbated by 2015’s successful bidders often having long-term holding requirements.”
