Why investors are looking beyond London for UK growth

Last month, we noted that hotel investors and developers looking to gain (or grow) a foothold in the UK could find good deals outside of London—and it seems that the investors are seeing positive results from these efforts. 

At an exclusive forum recently held by Tisco Wealth and Forbes Thailand, in association with Knight Frank Thailand, Thai property tycoon Khunying Sasima Srivikorn recommended the United Kingdom as the best location for offshore property investment after seeing a double-digit yield from a hotel investment in the Reading, a large town in Berkshire.

According to a story in Nation Multimedia, Sasima said her investment company, Srivikorn Group, was currently awaiting permission from Reading council for investment in other real-estate projects in the town, consisting of a convention center, hotels and serviced apartments.

Located 66 kilometers west of London, and with improved links to the capital via the upcoming cross-rail route, Reading is an attractive real-estate investment location for Srivikorn Group, with land prices in that are five to six times lower than those in London, Sasima said. Property in London averages 2,000 to 3,000 GBP per square foot, but in Reading the price goes down to 400 to 500 pounds per square foot, she said.

Reading is seen by Sasima and her group as offering excellent investment returns, with property prices expected to rise in the near future because of the cross-rail project, besides which the double-digit yields currently available cannot be found in London, she explained. 

Reading also has good universities and schools, especially business schools, which attract many foreign students, who form another segment that the company can tap into. She told the forum that for anyone planning offshore property investment, the UK was in her view the best location because it was a safe country with clear regulations.

The opportunities don't stop in England, of course. Glasgow and Northern Wales are seeing increased investment and interest, and deals have been announced for both urban hubs like Belfast (in Northern Ireland) and rural Scotland since the beginning of October.

By the numbers
According to PwC's UK Hotels Forecast 2016, the UK outside of London has seen a "very good year to date." Growth has come from occupancy, but particularly from rates. (One notable exception is Aberdeen, which has seen both occupancy and ADR falls, partly due to sliding oil prices, the report notes.)

Overall strong trading and low supply mean that for 2015 PwC expects 1.6 percent occupancy growth in the regions, taking occupancy to 76 percent and room rate growth of 4.6 percent, taking rates to £67. 

PwC also forecasts further growth in 2016, but just not at the same pace. A 0.6 percent gain is set to take occupancy to 77 percent – its highest level ever - while room rates are set to hit £69.

While London's hotel scene seems to be evergreen, the cost of real estate may drive away all but the biggest investors. By turning attention to other cities and the countryside, investors may gain a strong foothold to build a presence. 

Currently, demand continues to outpace supply growth, but supply continues to increase and above average growth is expected in 2016.