• Investment volume of €2.8 billion in the first three quarters

• Share of single deals rises to 75% in the third quarter

• Strong demand for property developments - around one third of the transaction volume accrued over the year to date

Around €856 million was invested in the German hotel market in the third quarter. Although the transaction level reported was therefore considerably lower than in the previous year’s quarter (Q3 2015: €1.4 billion), the hotel transaction market reached €2.8 billion accrued over the year to date. Compared with the first three quarters of 2015, the decline amounts to a mere 1.5%. By contrast, the first half of 2016, reported a year-on-year increase of 39%. This is the conclusion of a current analysis prepared by the commercial real estate services company CBRE.

Hotel transactions nonetheless account for 9% of all investments in commercial real estate.

Largest pure hotel transaction so far in 2016: sale of the Hyatt Regency in Düsseldorf
The largest pure, single transaction to take place this year is particularly notable in the third quarter: The five-star Hyatt Regency Düsseldorf went to Primotel Europe, a European hotel fund, and Algonquin for more than €100 million. The luxury hotel has 303 rooms.

Another large single transaction also took place in Düsseldorf: The British investment company Benson Elliott sold the Nikko Hotel in Düsseldorf. The hotel with around 386 rooms is part of the German-Japanese centre, which also houses office and retail space.

Hotel developments are also increasingly finding new owners. The third quarter saw Union Investment acquire the Holiday Inn City Nord in Hamburg, for instance. Over the course of the year, the Holiday Inn City East and the Holiday Inn Express City East developments in Munich, with some 307 hotel rooms in total located in the Neumarkter Strasse, were also acquired by Deka Immobilien. The share of deals accrued over the year to date in the property development segment climbed to around a third of the investment volume in a year-on-year comparison. “This market trend reflects the undersupply of existing properties and shows that even institutional investors are meanwhile taking on the development risk in order to secure attractive investment properties at an early stage. We assume that this trend will initially continue,” Bruckmeier explains.

Four portfolio transactions took place in the third quarter, including the acquisition of seven hotels of the Arcadia and Dorint brands by the HR Group. The portfolio comprises seven hotels in Germany and in the Netherlands, with around 1,130 rooms in total. Furthermore, the Ergo Insurance Group disposed of its seven Seminaris Hotels which have around 1,155 rooms. Holiday hotels also report growing demand, an example being the Travel Charme Portfolio with six hotels which was sold to a private investor in the third quarter.

“The four-star category is particularly popular with investors – in the first three quarters of 2016, approximately 46% of the transaction volume was attributable to this star category,” Bruckmeier says.

German investors show strong interest in buying
Measured by the total number of transactions (single assets and portfolios), a good 63% (57 transactions) were attributable to German investors at mid-year who therefore accounted for around €1.4 billion overall. By contrast, some 18 deals of worth €976 million in total were signed by investors from France. US investors participated in transactions of around €125 million.
In the third quarter, with respect to the transaction volume, open-ended funds/special funds were the most active purchaser group investing €243 million, followed by private property companies/private investors (€241 million) and asset/fund managers (€148 million). Over the year to date, property companies/REITs were the most active purchasers with around €1 billion invested.

Prime yields still stable quarter-on-quarter
Sustained high demand for hotel real estate and scarce supply is placing pressure on yields. For first-class hotel properties in Germany’s core markets, prime yield remained unchanged at 4.75% in the third quarter, displaying a slight downward trend. “As investors are meanwhile increasingly turning to secondary locations, we are also seeing yields falling outside the core markets in selected locations as well,” Bruckmeier comments. In secondary locations, yields (depending on the locality) are nonetheless a minimum of 75 basis points above the prime yields of the core markets.

Forecast: repeat of the 2015 record result unlikely
“Despite considerably fewer portfolio deals in 2016, the investment volume accrued over the year to date has fallen only 1.5% short of the figure of the year-earlier period. While in 2015 there was still a balanced mix between portfolio and single deals (portfolio transactions at 49% and single transactions at 51%), single transactions have dominated the year so far,” Bruckmeier explains.

“There is currently a lot of product in the market. Opportunistic Anglo-Saxon vendors in particular are keen to benefit from the excellent selling conditions at present. In view of the current market development and pending transactions, the outcome for the year as a whole is nonetheless difficult to predict although the record result achieved in 2015 is unlikely to be repeated – the fourth quarter will be the determinant factor here”, Kaussen says.

Contacts:

Olivia Kaussen
CBRE GmbH
Head of Hotels Germany
+49 (0)89 24 20 60 25
olivia.kaussen@cbrehotels.com

Armin Bruckmeier
CBRE GmbH
Head of Corporate Hotel Brokerage Germany & CEE
+49 89 24 20 60 44
armin.Bruckmeier@cbre.com

Dr. Jan Linsin
CBRE GmbH
Head of Research Germany
+49 (0)69 17 00 77 663
jan.linsin@cbre.com