Click to enlarge image

Germany has had its most active first quarter (Q1) since records began for hotel investment volumes, according to the latest data from global commercial property advisor CBRE.

Germany saw a total of €1.15 billion transacted over the course of Q1 2017, representing an increase of 55% year-on-year. This follows a strong performance at the end of last year, which saw €2.19 billion of completed deals in the fourth quarter of 2016, demonstrating Germany’s strong market fundamentals. Notably deals in Q1 2017 included the four-star ARCOTEL John F Berlin that formed part of the ‘Quartier am Auswärtigen Amt’ mixed-use scheme – CBRE advised the vendor.

Overall, European hotel investment activity in Q1 2017 totaled €3.82 billion, down 14% year-on-year. However, in addition to Germany, Spain and Italy also bucked the trend and recorded growth. Italy saw deals amounting to €229 million; an increase of 48%. Meanwhile, Spain recorded €564 million of deals, reflecting an increase of 24%.

Armin Bruckmeier, Head of Corporate Hotels Brokerage Germany & CEE, CBRE
The German market sees an increasing appetite for the forward purchase of hotel projects, indicating that investors are increasingly willing to take the risk on projects in order to secure prime locations in advance.
Armin Bruckmeier, Head of Corporate Hotels Brokerage Germany & CEE, CBRE

UK hotel investment volumes reached €1.03 billion in Q1 2017, which is roughly in line with investment volumes in the same period last year. The UK is beginning to see hotel portfolio break-ups, which is resulting in larger single assets coming to the market.

Investors are increasingly targeting Central and Eastern European (CEE) markets, with many CEE countries experiencing hotel performance growth as a result of strong economic growth and increased inbound visitation. CBRE Hotels advised Algonquin on the sale of the Sheraton Grand Krakow hotel to Invesco Real Estate in March 2017.

Catherine Latzenhofer, Analyst, CBRE Hotels, EMEA
Most European markets see hotel cap rates at a three-year low, suggesting strong investment appetite in the sector. However, a shortage of stock in the highly sought after markets is likely to remain a limiting factor to increasing transaction volumes in the months ahead.
Catherine Latzenhofer, Analyst, CBRE Hotels, EMEA