The UK, Germany and Spain are the three most attractive hotel investment destinations in Europe, with more than two-thirds (69%) of investors identifying these markets as the preferred countries for hotel investment in 2018, according to CBRE’s European Hotel Investor Intentions Survey 2018.
The UK has retained its position as the most sought-after destination in Europe for hotel real estate investment in 2018. 35% of respondents selected the UK as their target market for hotel investment, an increase of 106% compared to 2017.
The UK’s number one spot was reinforced by a record year for hotel investment which saw the UK register €6.2bn, a 39% increase year-on-year, and the highest hotel investment volume of all the European countries in 2017.
Germany was identified as the second most attractive market favoured by 18% of respondents. The German hotel sector has experienced strong market fundamentals, coupled with favourable financing conditions and this is set to continue in 2018. Spain was ranked third by 16% of respondents and saw the highest year-on-year growth in investment volumes on a country-level in 2017. France was fourth with 8% of respondents and Ireland jumped to fifth place, alongside Italy with 6%.
Poland and the Czech Republic have entered the top 10 in 2018. Poland was ranked ninth with the Czech Republic moving from 12th to 10th place. Eastern European markets are being increasingly targeted by the more opportunistic funds because of robust performance growth over the past few years.
Paul Collins, Head of Hotel Investment properties for UK & Ireland, commented: “The UK is attracting a wide range of international investors seeking opportunities in key cities such as London, Manchester and Edinburgh. Investor appetite for quality regional hotels will remain resilient and despite the UK’s impending withdrawal from the European Union, our survey results suggest that any restrictions to the growth of UK investment volumes are more likely to be because of restricted supply rather than a reduction in demand for hotel assets.”
In a clear reflection of the gathering strength for European hotel investment, 94% of respondents cited that they are planning to invest either the same or more capital into hotel real estate in 2018 compared to 2017. This highlights the growing attractiveness of hotels amongst an increasingly diverse investor base.
The annual report, now in its second year, also found that 38% of respondents are targeting predominantly gateway cities with capital cities falling slightly behind with 36%, secondary cities ranked third with 16%, followed by resort locations with 9%. This could be attributed to the shortage of investible stock in major European Capital cities, and the low yield environment across prime cities, which is prompting investors to look further afield.