London, 14 February 2017 – European hotel investment reached €7.4 billion in the fourth quarter (Q4) of 2016, representing a notable increase of 19% in transaction volumes compared to a strong Q4 2015, according to the latest data from global commercial property advisor CBRE.
Overall, European hotel investment activity in 2016 totaled €20.4 billion, despite transaction volumes decreasing by 7% 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% year-on-year in Q4 2016 and contributing a record €5.1 billion of completed deals in 2016. This was largely attributed to Germany’s strong market fundamentals and abundance of quality hotel assets.
The UK hotel investment transaction turnover reached €4.37 billion in 2016, a decline of 53% on the previous year. Whilst the level of transactions declined hotel yields in London remained stable despite the outcome of Britain’s EU referendum result.
Joe Stather, CBRE Hotels, said: “The last quarter of 2016 saw a surge in deal completions following a sluggish third quarter. 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.”
There has been a notable shift in the type of nationality of the investors into European hotels throughout 2016. Domestic investment increased, accounted for 12% of European hotel deals during the last 12 months 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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