Berlin, 12 July 2017 – According to Colliers International, the German hotel investment market took a short breather in the wake of last year’s record results, stabilizing at a high level. Andreas Erben, Managing Director of Colliers International Hotel, attributes this trend to the looming lack of supply. With a transaction volume of around €1.7bn, the hotel investment market recorded a year-on-year decrease of 19%, nevertheless still exceeding 2015 results.
“The ongoing drop in portfolio deals hints at increasingly scarce supply on the hotel investment market. While in the previous year almost half of transaction volume was generated by portfolio deals including some large-scale transactions, this share has now dropped to 21%, or approximately €350m. Single deals remain popular, accounting for the lion’s share of total transaction volume with just shy of €1.4bn or 79%. The largest single deal registered in Q2 was the sale of the Pullman 4-star hotel in Munich to a REIT based in Singapore,” Andreas Erben adds.
Strong German investor presence
German and foreign investors accounted for shares of buy-side activity similar to those of the previous year. German investors increased their share by 3 percentage points to around €950m, or 56%. German investors also increased their share sell side by 3 percentage points, disposing of hotel assets valued at slightly more than €1bn (60%).
4-star hotels remain popular
4-star hotels continue to be a popular choice among investors, accounting for 55% or €940m and defending their top position with an increase of 1 percentage point. Similar to the previous year, 3-star hotels followed in the ranks, generating a transaction volume of around €380m, or 23% of total transaction volume. 2-star hotels came in third, gaining a spot in the ranks yoy with a 9% share in transaction volume. Boarding houses trailed closely with €130m, significantly exceeding the share of less than one percent posted a year ago and emerging as a viable investment alternative on the current market. 1-star hotels generated €30m, with 5-star hotels only accounting for around €10m in transaction volume.
Although investors continued to primarily focus on stock properties in the first two quarters of 2017, the share generated by hotel stock fell 6 percentage points yoy to a current 66%. Property developments, assets under construction and new-builds continued to attract investment activity, collectively accounting for 26% of transaction volume. This result is a clear indication of ongoing growth in the German tourism sector.
Asset/fund managers most active investor group
Asset/fund managers poured roughly €510m into German hotel assets in H1 2017, taking the lead in terms of transaction volume with 30%, a yoy increase of 21 percentage points. Just like last year, open-ended real estate funds and special funds followed in the ranks with just under €300m, or 17% of transaction volume. Private investors and family offices claimed third place at around €290m.
Property developers and development companies led the ranks sell side at just shy of €490m with corporates and owner-occupiers in pursuit at €420m. Opportunity funds and private equity funds trailed with roughly €260m.
Outlook: End-of-year results similar to 2016 within reach despite short breather
“Despite the fact that activity on the German hotel investment market has quieted down somewhat following several record quarters, we can still expect transaction volume to come close to 2016’s record results due to the typically strong end-of-year rally and ongoing high demand for hotel assets,” Andreas Erben concludes.