CBRE Hotels reflects on the positive performance of the German and Russian hotel investment market in 2011. Hotel transaction volume in Germany grew for the second consecutive year.
In 2010 transaction volume increased by more than 100% on the previous year and CBRE Hotels recorded a further 22.4% increase in 2011, to 1.1 billion. This includes small transactions below 10 million and site acquisitions. Excluding the latter, transaction volume was 950 million, up from 800 million in 2010.
Investors' focus was on upscale hotels which accounted for approximately 90% of total transaction volume. Noticeably, the 177 bedroom Grand SPA Resort A-ROSA Sylt was bought for over 60 million by Deutsche Immobilien Invest, representing the first considerable resort hotel transaction in the past year.
Similarly, other German hotel chain assets attracted attention from investors; the 322 bedroom Steigenberger Airport Hotel project at Berlin-Brandenburg purchased by Swiss Acron AG and the 177-bedroom Steigenberger Grandhotel Handelshof in Leipzig purchased by a private investor.
Due to several high volume upscale single asset transactions, the average transaction volume increased by 30% to approximately 30 million per transaction.
The importance of Germany's investment market was underlined by the dynamic investment activity of foreign investors who were responsible for approximately 60% of the transaction volume in 2011. 75% of foreign investors were from Europe more specifically Norway, Great Britain and Switzerland 25% were from outside of Europe, including Singapore, Lebanon and Israel.
Geographically, Germany's five big cities were principal targets and accounted for approximately two-thirds of the total investment volume in 2011. Frankfurt was the most active investment market with a transaction volume of over 350 million.
Berlin ranked second after Frankfurt, accounting for a volume of 220 million, the largest transaction being the purchase of the Scandic Hotel at Potsdamer Platz by Wenaasgruppen.
Private investors were buyers not sellers in 2011 and hotel companies, who in recent years were one of the largest type of vendors, were not very active. French hotel company Accor S.A. only sold two small properties in Garmisch-Partenkirchen and Friedrichsdorf; Spanish NH Hoteles sold three hotels in Munich, Frankfurt and Hamburg.
With the high demand for upscale hotel investments, prime yields for leased hotel assets in key hotel markets sharpened from 6.25% to 6.00% over the course of the year. Average yields for leased hotels were around 6.5% and 7.5%.