Investment in London hotels sinks to lowest in a decade – but rate cut prospect boosts confidence
London hotel investment volumes hit their lowest in the past decade, with total transaction volumes amounting to just over £1bn in 2023. But experts are hoping a fall in interest rates will help drive recovery in the market, and confidence is still high.
The increased cost of debt and uncertainty around interest rate stability put many deals on hold, a study from Costar told Morning Wire exclusively. Volumes are down 36 below the prior year and about 70 per cent lower than the previous peak in 2019.
However, Christina Balekjian, director of hospitality analytics, UK, at Costar Group, said interest rate cut prospects could “support deal volumes as the year progresses, with the bid-ask gap narrowing too”.
“Core markets such as London will remain sought after as the city tends to be more resilient through challenging macroeconomic time,” she said.
“Its global appeal and position as a financial, political, and cultural centre translates in all-year round demand, which should support stable trading growth and continue to attract foreign investors.”
Already this year, two bumper hotel transactions have kicked 2024 off to a strong start.
In January, Starwood Capital acquired the 10-hotel Radisson Edwardian portfolio for a reported £800m, most of which is in central London.
Travelodge also acquired over 60 properties for around £210m including assets in London amongst other regional assets.
“Such activity signals that buyers and sellers could be more aligned in terms of pricing expectations compared to 2023,” Costar said.
Late last year, billionaire entrepreneur Asif Aziz paid £135m for Haymarket House in Soho, with plans to convert the upper floors into a £400m hotel.
Aziz said he is plotting a conversion of the office space upstairs into an affordable London hotel as he looks to capitalise on the rising demand for travel space in the capital.