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The supply of serviced apartment stock across Europe is set to accelerate, with supply forecast to expand by 21.2% over the next three years.
According to Savills, the largest branded groups in supply terms are currently Staycity, Edyn and Adagio Aparthotels, and these three will reportedly account for 22.9% of the total pipeline, representing an average growth in stock of 45.1% over the next three years.
Savills said that London continues to be the biggest growth market with just under 3,000 units in the committed pipeline, reflecting a 26.7% expansion on current stock levels, followed by Munich with a 24.7% increase.
Since 2018, the company has recorded that institutional buyers have accounted for a 56.1% share of European serviced apartment transaction volumes, exceeding the 50.9% share across the wider hotel market over the same period.
In 2021, investment into European serviced apartments reached €496.6m (£418.87m), down 42.9% compared to the same period in 2020, as stock shortage limited transactional activity.
However, the UK remained the biggest market, accounting for a 47% share of volumes, in line with the five year average of 46.6%. Germany and France ranked second and third largest by investment volumes at 18.4% and 17.3% respectively.
Marie Hickey, director of commercial research at Savills, said: “Interestingly, beyond London and Munich, it is key regional and emerging destination cities, namely Istanbul and Manchester, that rank in third and fourth place. Stuttgart and Belfast lead in growth terms with 372% and 337% respectively.
“This shift reflects a combination of rising developer and investor awareness of the sector and its operators, alongside operator appetite to expand into new, relatively under-served markets. These markets also tend to present a greater degree of opportunities as do submarkets within well-established cities such as London and Munich.”
Richard Dawes, director of EMEA Hotels, added: “Serviced apartments are continuing to prove popular with investors. The leaner cost structure coupled with the relative operational resilience during the pandemic have emphasised the sector’s less volatile cashflow, relative to the wider hotel space and potential for tighter yield dynamics going forward.
“With 60% of current European stock still unbranded, there is still significant opportunity for brand expansion, and we expect to see more private equity vehicles enter the market, backing new and existing operators in order to help establish and drive platform expansion.”
