Berlin, 12 April 2017 – Activity on the German hotel investment market remained strong going into 2017. According to Colliers International, Q1 2017 saw a new record high in the wake of 2016’s excellent end-of-year results, topping the results posted in Q1 2016 by 45% with a transaction volume of over €1.0bn.

According to Andreas Erben, Managing Director at Colliers International Hotel, “Similar to the activity we have seen in past quarters, investors showed particular interest in deals involving single hotel assets in the first three months of 2017. This asset type changed hands for €780m, accounting for 75% of total transaction volume and coming in strong ahead of portfolio deals, which posted just shy of €270m due to limited supply. Hamburg saw the highest-volume deal with the purchase of the Azure Group’s Radisson Blu 4-star superior hotel by a Norwegian family-run company.” 

German investor activity remains high

Activity by German and international buyers equalized considerably compared to 2016. Although German investors were again the more active of the two, accounting for just over €600m (58%), their share in total transaction volume dipped yoy by 29 percentage points.

Foreign investors, however, took the lead sell-side, accounting for slightly more than €560m and boosting their share of total transaction volume 47 percentage points yoy to 55%.

4-star hotels head investor lists

Just like last year, investment activity continued to revolve primarily around 4-star hotels with this hotel category bringing in 63% of total transaction volume in Q1 2017 (€650m), up 10 percentage points yoy. 3-star hotels trailed at some distance to claim second place, accounting for just shy of €240m, or 23% of total transaction volume. 1 and 2-star hotels followed with a 9% share, down only 2 percentage points from previous year results. Investors poured just under €60m into boarding houses, with no deals signed for 5-star hotels in the first three months of the year.

The majority of transaction activity (€650m) took place in Germany’s seven major hotel locations – Berlin, Düsseldorf, Frankfurt am Main, Hamburg, Cologne, Munich and Stuttgart. Compared to the previous year, these cities lost 3 percentage points in hotel investment activity to secondary locations. With an average of 212 rooms, the hotels sold in Germany’s top 7 locations featured 86 more rooms on average than those sold in secondary locations.

Asset/fund managers strongest player buy-side

Coming in third in the previous year, asset/fund managers were the most active investor group buy-side in Q1 2017, pouring slightly more than €400m into German hotel assets and accounting for 39% of transaction volume. Private investors and family offices followed in the ranks with just over €260m. Open-ended real estate funds and special funds relinquished last year’s first place for third with a 12% share in transaction volume.

Corporates and owner-occupiers dominated sell-side with just under €300m, pushing last year’s leader, project developers and development companies, into second place with just shy of €270 million, or 26%. Opportunity funds and private equity funds trailed closely with around €260.

Outlook: With a remarkable start, 2017 could replicate 2016’s record results

“The activity levels seen during this first quarter make it clear that the upswing on the German hotel investment market continues unabated. Hotel asset investments are more popular than ever. The number of assets available in Germany, however, is limited, a situation that is also reflected in ongoing yield compression. Assuming conditions remain as they are, 2017 could end up bringing in results similar to record year 2016, although 2017 is unlikely to top those results significantly due to the limiting factors mentioned previously,” Andreas Erben concludes.