Jones Lang LaSalle
Stefan Giesemann - JLL
‘We see that a lot of investors are looking at Germany now instead of the UK or the US, due to the political situations there,’ Stefan Giesemann, senior vice president of the Hotels & Hospitality Group at JLL in Germany, told REFIRE.
In the first quarter of 2017, €1.1b of hotel deals were transacted in Germany, up 50% on the same quarter a year earlier, thereby hitting a new high, according to Stefan Giesemann, senior vice president of the Hotels & Hospitality Group at JLL in Germany.
‘We see that a lot of investors are looking at Germany now instead of the UK or the US, due to the political situations there,’ Giesemann told REFIRE. ‘Investors who traditionally used to look mainly at retail and offices are now much more interested in Germany’s hotel sector, which is mainly due to the comparable higher yield levels achievable in this asset class. As a result, investors today are mostly looking for good lease terms for branded hotels across all star types.’
Institutional investors accounted for €640m of acquisitions in the first quarter, according to JLL, followed by private investors and family offices with 23%. Open-ended funds and Spezialfonds accounted for 22%, almost double their 12% last year.
Of the total this year, €650m were transacted in Germany’s most important hotel markets - Berlin, Munich, Düsseldorf, Frankfurt, Hamburg, Cologne and Stuttgart, according to Colliers International.
The biggest single asset transaction so far this year was the sale of the 4-star Radisson Blu hotel in Hamburg last month to family-owned Norwegian textile and real estate group Wenaasgruppen by Luxembourg-based Azure Property Group for an undisclosed sum, believed to be in the region of €200m. At 108m, the Radisson Blu is the second highest inhabited building in Hamburg, surpassed only by the new concert hall, the Elbphilharmonie.
Earlier this month, Invesco Real Estate acquired the recently opened Holiday Inn in Düsseldorf for one of its separate account mandates from Cologne-based developer Pandion for an undisclosed sum. The four-star hotel is leased to Arcadia Hotelbetriebe on a 20-year lease.
It is easy to see the attraction of the German hotel market: rents are on the rise and the sector is extremely buoyant. As a result, hotel rates in Germany’s Top 8 cities – Berlin, Stuttgart, Hamburg, Munich, Frankfurt, Cologne, Dusseldorf and Dresden – are expected to increase on average this year by 6% to €120 a night, according to Engel & Völkers Hotel Consulting’s (EVHC) ‘Sentiment Report Hotelmarkt Deutschland 2017’, which was published last month. Stuttgart is expected to benefit from the strongest rental growth with EVHC forecasting an increase in hotel rates there of 18% this year, followed by Berlin with 13%.
‘Investors have to be flexible, so we’re seeing more interest not just in the city centres of the ‘Big 6’ but in non-core locations in the ‘Big 6’ as well as interest in secondary and tertiary cities,’ Giesemann said. ‘I expect to see further growth this year and for demand for hotels in Germany’s Top 10 cities to continue.’
International investors have also become more active in the German hotel sector. Last month, London-based real estate investment firm Queensgate Investments acquired Generator Hostels from Patron Capital and Invesco Real Estate for an enterprise value of €450m. The pan-European portfolio comprises almost 8,700 beds in cities such as Berlin, Hamburg, London, Paris and Rome. Generator intends to open hostels in Madrid and Miami, Florida later this year. US hotel chain Hilton also announced last month that it plans to open six new hotels in Germany this year in cities such as Freiburg and Berlin, at an investment cost of €120m.
Last year was a record year for the German hotel market, with €4.9b transacted, reflecting an increase of 12% compared to 2015 and a tripling of the 10-year average, according to JLL.
‘The first quarter this year marks a new record, so if investment continues like that, we could see a similar deal volume again this year,’ Giesemann said.