Investment in serviced apartments could triple by 2018

17 October 2013 by
Investment in serviced apartments could triple by 2018

Investment in serviced apartments has the potential to triple over the next five years, according to new research.

The UK Serviced Apartment Report 2013 from real estate advisor Savills confirms that service apartments have finally evolved as a recognised sector, although it still has a long way to go to replicate the strength of the market in the USA.

Serviced apartments have accounted for 12% of USA bed sales so far in 2013, with investment in the sector totalling £1.3b, compared to 5% of hotel sales in the UK, where the investment has been only £123.5m.

Tim Stoyle, head of hotel valuations at Savills, said: "The US is a bigger market so like-for-like comparisons are difficult, but the dramatic difference in volumes does demonstrate the significant potential for growth in the UK market. New investors to the sector have recognised its investment potential and are committed to expanding purpose built stock."

It is not only London that has capacity for expansion, according to Savills. Supply in the key regional cities is even more constrained. However, further growth would need to be approached cautiously due to the shorter lengths of stays typical of business visitors outside the capital.

Savills notes that growth in revenue per available apartment growth hit 16% this year, far exceeding that seen in the hotel market where revenue per available room has averaged 4.1% over the same period. Occupancy also improved over the first half of 2013 with second quarter occupancy up 1.3 percentage points year-on-year, with rates up 3.6% over the same period.

The report has been welcomed by the Association of Serviced Apartment Providers (ASAP), which has 57 members in the UK and Ireland, representing in excess of 12,000 apartments.

"Many of ASAP's members have launched new properties in 2013 and have significant expansion plans for 2014 which confirms the growing consumer demand for the serviced apartment product and the positive outlook for the sector," said a spokesperson for ASAP.

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