Christie & Co has predicted that the the region-driven growth which characterised the hotel transaction market last year will ‘dominate’ the landscape in 2016.
According to the estate agency’s Business Outlook for 2016, average business property prices in all sectors once again increased in 2015 with the hotels sector increasing by 9.2%, compared with 9% across all sectors.
Christie predicts that the value of businesses will continue to rise in the medium term in line with any increase in their profitability, but likely outstripping pre-recession levels.
Barrie Williams, managing director of the firm’s hotels division, said that although London remains a strong home for hotel investment, the “significant growth” in transaction volume in 2015 was largely driven by the regional market, which has seen increased investor confidence.
He said: “While high net worth individuals and institutional investors continue to show interest, private equity firms and overseas buyers have been prevalent, as they realise debt availability has improved and acceptable returns can be made as the economy and hotel operational performance continues to grow.
“There may be some large scale transactions in 2016 but our expectations are for regional transactions to dominate the volume.”
He added that hotel operational performance will continue to “power ahead”, overseas investor demand will remain strong and the availability of debt funding will aid private equity investment into the hotels sector.
Meanwhile, the report said that relatively subdued volumes coming to the market in 2015 created a scarcity of assets in the private owner-operator market that further fuelled price growth.
At the same time, continued low interest rates and an improved lending environment created an appetite to acquire. Christie said that this disparity between supply and demand looks set to continue in 2016 alongside a gradual increase in single asset transactions.
Chris Day, global managing director, added that although the company expects values to rise in the medium term there are still areas of uncertainty, citing the National Living Wage as a key example.