London Serviced Apartment Sector Sees Activity Surge

The London serviced apartment sector has seen a surge of activity following the Olympic Games, according to Jones Lang LaSalle's Hotels and Hospitality team...

The London serviced apartment sector has seen a surge of activity following the Olympic Games, according to Jones Lang LaSalle's Hotels and Hospitality team. Developers have proven to have a real appetite for the market, particularly in central London, and the interest of investors is also piqued.

Currently, London is the most mature market for serviced apartments in Europe, but internationally it is one of the smallest. Most developments are either part of residential, hotel or mixed-use buildings, and there is a notable lack of stock. With demand increasing for serviced accommodation, there has been a surge in new openings. For 2013 there has been five confirmed projects and there are 377 units in the development pipeline.

Jones Lang LaSalle claims converting secondary offices into serviced apartments could provide an attractive opportunity for developers, especially as occupancy levels for serviced apartments stand at 85 per cent. This is higher than the hotel market level, which is around 81 per cent.

Adam Wilson, vice president in Jones Lang LaSalle’s Hotels and Hospitality team,  commented: "The outlook for the sector is positive because of limited supply, good profitability and high yields. Institutional and traditional residential investors have historically been the primary buyers of serviced apartments, but we are now witnessing specialist serviced apartment operators move into acquisition mode such as Ascott, Frazers and Cheval, which is driving pricing further."

Trading performance for serviced apartments is expected to improve in 2014, as better economic conditions increase corporate demand. For those considering property investment, serviced apartments are also generally more profitable for a management perspective because of the less intensive levels of service and staffing.

However, the serviced apartment sector in the UK is still in an early stage. Development is integral to enable investors to enter the market as existing stock simply isn't available. Meanwhile, global hotel operators are focusing on growing their serviced apartment brands, such as Staybridge Suites by InterContinental Hotels Group and Residence Inn by Marriott.

- Tuesday 17 December 2013

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