UK portfolio deals dominate; single asset deals off 34%

LONDON - London-based consultancy Knight Frank has reported that £3 billion in portfolio transactions (compared to £990 million last year) bolstered U.K. hotel investment during the first six months of 2024, but single-asset deals declined by 19% and one-off volume was down 34% year-over-year.

The recent £850 million acquisition by Blackstone of the 33-property Village Hotel portfolio, Starwood Capital Group’s £800 million purchase of 10 Radisson Edwardian Hotels in London and Landsec’s £400 million disposal of its hotel portfolio to Ares Management are all examples of the quality of portfolio deals completing so far in 2024.

In total, investment for the first half of the year there was just 10% lower than the volume of transactions taking place in H1-2019.

Report author Philippa Goldstein said the challenging investment market has also impacted the volume of developments and individual fixed income deals. As a result, portfolio transactions accounted for some 76% of the total H1 transaction volume, which compares to just 53% in H1-2019, when a similar level of portfolio transactions took place.

Where a particular asset meets all the investment criteria, we have seen certain buyers willing to pay full prices for these assets.

Henry Jackson

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She said some sellers’ expectations have now started to edge closer to buyers’ pricing levels, but transaction timelines continue to impact the market and the ability to conclude a successful sales process. The ongoing high cost of debt, a buyer’s unwillingness to price in future growth prospects or commit to expensive unforeseen capital investment, are all factors that have both slowed or stalled the pace of transactions.

Fully, 50% of investment focused on London, driven by overseas investors who channeled some £1.3 billion into the city. While much of the activity stemmed from portfolio transactions, the active capital came from a combination of private equity and institutional buyers. U.S. investors have dominated the landscape, accounting for some 77% of the total U.K. investment activity.

Looking ahead, Goldstein said with interest rates expected to reduce from the autumn and once the General Election has passed, greater levels of investment activity are expected, from both domestic and overseas investors.

Having remained at a relatively low level during the first six months of the year, investment volumes from the Middle and Far East are likely to switch up a gear, with the potential for improving political and economic transparency and reduced currency volatility.

Meanwhile, European family offices have been active in the sector, and this is expected to continue, remaining attracted to those hotel markets where performance has been resilient and with moderate levels of new supply.

“Where a particular asset meets all the investment criteria, we have seen certain buyers willing to pay full prices for these assets,” said Henry Jackson, partner and head of Hotel Agency at Knight Frank.