American money is driving strong UK hotel investment market

16 October 2014 by
American money is driving strong UK hotel investment market

Investors have pumped £1.7bn into the UK hotel market in the third quarter of 2014, with North American investors leading the charge, according to investment management and real estate specialist JLL.

JLL's latest quarterly figures, presented at its annual hotels conference in Manchester, report a 278% increase in investment in London and regional UK hotels compared with the same period in 2013.

Its year-to-date figures also show a lift on last year, with a 29% increase in total investment across the UK market compared with the same period in 2013.

In quarter three, just more than £1b, equating to 58% of overall UK investment volume, came from North American investors. This is a 51 percentage point uplift from the same period last year when investment from this source stood at just 7%.

"The significant increase in investment from North America in part reflects a reallocation of funds as a result of US real estate becoming more expensive and we predict that this trend will continue," said Jon Hubbard, managing director in JLL's Hotels & Hospitality group.

Investment in London's hotel market is up by 22% compared with quarter three last year, with some £387m pledged in the capital. The largest investment share into London came from Asian sources, which accounted for 31%, with Middle Eastern investors accounting for a further 23%.

Total hotel investment in London was flat in the first three quarters of this year compared with 2013. This was in part due to the InterContinental London Park Lane deal in the second quarter of last year, which was the largest sale and manage-back ever of a single asset in the London hotel market.

In one of the prime single asset deals of the year, JLL's Hotels and Hospitality group advised on the sale of the Marriott Grosvenor Square by Strategic Hotels & Resorts to Hong Kong-based Joint Treasure International for £125m.

Other significant deals include the sale of Edinburgh's Roxburghe Hotel to US-based investment management firm Starwood Capital, which is the largest post-recession single-asset deal in Edinburgh.

Hubbard said: "While London remains a highly attractive market for global investors, the UK's regions have become a key focus for international investors, reflecting a confidence in the continued recovery and growth of the sector over the coming years.

"Investors from North America, China and other parts of the Far East are currently the principal sources of international investment, with investors eyeing cities such as Aberdeen, Edinburgh and Manchester."

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