According to the latest data from commercial property advisor CBRE, European hotel investment reached €7.4 billion in the fourth quarter of 2016, an increase of 19 percent in transaction volumes compared to Q4 2015.
Overall, European hotel investment activity in 2016 totaled €20.4 billion, despite transaction volumes decreasing by 7 percent compared to 2015. However, 2016 was still considerably higher than the long-run average and recorded the second-highest annual deal volume for the European hotel sector.
The German hotel investment market proved one of the most attractive investment markets in Europe, achieving an increase of 45 percent year-on-year in Q4 2016 and contributing a record €5.1 billion of completed deals in 2016. CBRE attributes this to Germany’s strong market fundamentals and abundance of quality hotel assets.
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Likely as a result of deals delayed in anticipation of the Brexit, UK hotel investment transaction turnover reached €4.37 billion in 2016, a decline of 53 percent from 2015. While the level of transactions declined, hotel yields in London remained stable despite the outcome of Britain’s EU referendum result.
“The last quarter of 2016 saw a surge in deal completions following a sluggish third quarter,“ Joe Stather, CBRE Hotels, said. “This was mainly down to many investors deferring decisions and awaiting clarity post the UK’s referendum on the EU membership. A positive end to the year and a strengthening deal pipeline across countries such as the UK, Spain, Germany and Italy would suggest that we are likely to see buoyant deal volumes for the first half 2017.”
CBRE also reported a "notable shift" in where European hotel investors were based last year. Domestic investment increased, accounting for 12 percent of European hotel deals during 2016, and there was also greater intra-regional cross-border activity, notably from Norway and France. Despite having dominated the acquisitions of hotel portfolios in 2015, East Asian and South-East Asian investors were less active in 2016, along with the predominately opportunistic funds of the U.S.
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