JLL: Serviced apartment transactions set to increase

The rise in tourism and corporate travel, and increasing knowledge of the sector’s strength, is driving investor interest in the serviced apartment sector.

That’s according to estate agency JLL which said while private equity and institutional investors make up the majority of sector investment, it will become increasingly attractive to property investors.

This is in part due to to the “attractive yields” it offers compared with hotels and the low operational costs, said JLL.

Transaction volumes in the UK have seen steady growth over the last couple of years with total serviced apartment deals reaching £325m in 2015, a 114% uplift compared with 2014.

During the first quarter of 2016, two deals took place in London, including the 77-room SACO The Canon and the 268-room StayCity Serviced Apartments & Aparthotels London Heathrow – selling for £32m and £35m, respectively.

JLL said it expects transaction levels to increase in the coming months.

In London over 1,500 rooms are due to open between now and 2019. Meanwhile, changing corporate and consumer habits and relative undersupply means that key UK cities also have big potential for growth, says JLL.

Figures from AM:PM estimate that Manchester has 2.2 serviced apartments per 1,000 overnight international business travellers with the figure in Birmingham standing at 1.4.

Max Thorne, managing director in JLL’s hotels and hospitality team, said: “Serviced apartments are really starting to be seen as a good investment opportunity because of the high profit margin, stable cash flow, high space efficiency, conversion flexibility and lower development cost.

“It can also be a solution to the oversupply of residential properties. Improved product awareness and the changing need of the corporate traveller are also propelling this on to the investor radar.”

He added JLL is also predicting “consolidation amongst operators” in the sector over the next 12 to 24 months.