October 18, 2011, Munich – After brisk activity during the first six months of the year, the German hotel investment market saw a marked decline from July to September. “At some €129 million, the third-quarter figure was only about a third of the total for the previous quarter,” reports Andreas Trumpp, Head of Research at Colliers International in Germany. “Despite everything, the annual result to date, at €730 million in transaction volume, is still above last year’s result by a wide margin – 53% – and it should also be noted that last year’s figures also included a somewhat weaker third quarter,” he adds. This amount includes transactions both over and under the €10 million mark, along with development projects. Hotel real estate thus continues to account for just under 5% of the total transaction volume attributed to commercial real estate in Germany.
Some 25%, or just under €185 million, of the capital invested in hotel properties up to the end of the third quarter came from private investors and family offices. At almost the same level, accounting for approximately 15% of the transaction volume, are open-ended real estate funds and special funds, owner-occupants, and opportunity funds / private equity funds. By contrast, the biggest groups of sellers were project developers, accounting for one-third, and owner-occupants, at nearly 19%.
The biggest individual sale of the year to date was completed back at the end of the second quarter, when Danish investment firm Keops sold Frankfurt’s Radisson Blu hotel to a Norwegian investor for about €100 million. The second largest transaction to date is the sale of the Grand SPA Resort A-ROSA Sylt five-star hotel, in List, for about € 63 million. “The biggest transaction of the third quarter, a four-star property in Munich, was only about half that size, at less than € 30 million,” Trumpp notes.
Since not a single sale of a five-star property was recorded during the period from July to September, three-star and four-star properties gained in terms of their share of the transaction volume, making up over 60% of all transactions by the end of the third quarter and emerging as investors’ favorite segment. All told, 25 individual and portfolio sales were recorded in this segment. “It is noteworthy that five-star properties accounted for nearly a quarter of the entire transaction volume, although there were only three sales in this segment,” Trumpp points out. “Purely in terms of volume, one-star and two-star hotels, boarding houses, and so on have been less important so far this year,” he adds.
On the demand side, observers are currently noting significant excess demand for good products. “We currently see a high level of liquidity on the market, but it is running up against a low supply of suitable products,” explains Andreas Erben, Managing Director of Colliers Hotel GmbH, describing the situation on the German hotel investment market. In Erben’s view, there are various reasons for this, including insufficient time remaining on existing lease agreements, inadequate indexing of leases, and lack of brand strength among operators. A number of projects that meet the investment criteria of institutional investors are, however, already in the advanced stages, which means that transaction volume can be expected to rise over the next twelve months. “Our positive mid-range expectations are based on the interesting projects in the pipeline,” Erben says in summary.