The future of the European serviced apartments market is looking bright, according to a new report from Savills. The firm predicted the sector will experience further growth, with local providers continuing to expand their offerings and international organisations also providing a greater number of serviced apartments in various markets around the continent. However, it is the former that will be the primary driver for the expansion of this sector in the short to medium term.
Savills revealed that the greatest potential for supply growth lies in core European locations - especially within cities that have a strong financial services sector, such as London. The organisation did point out, though, that compared to the US and the Asia-Pacific region, Europe's serviced apartment market is still in its infancy, which has made it more difficult to track investment activity in this kind of real estate.
Another location that investors may want to keep an eye on is Dubai, after DAMAC Properties announced last month that it intends to bring 4,000 serviced hotel apartments to the emirate's market by the end of 2013. Senior vice-president at the firm Niall McLoughlin commented: "Dubai currently has less than 200 serviced apartment buildings in the market, according to the Dubai Department of Tourism, but the product is hugely popular with international tourists." He added that his company sees the industry as "an important driver" for its business in the coming years.
Demand from travellers and the corporate sector are among the reasons why investors should consider entering the market, with Savills highlighting the high occupancy rates of serviced apartments in comparison to hotels. In London, for instance, the three-year average occupancy level in hotels is just above 80 per cent, while for serviced apartments this figure stands at a little over 85 per cent. Savills even suggested that, in some cities, the sector has benefited from the global financial crisis, because many firms see serviced apartments as "a more cost-effective alternative to long-term hotel stays".
- Monday 15 October 2012