Brexit remains a divisive issue among many investors, with the impending exit of the UK from the European Union posing both challenges and opportunities for anyone hoping to invest in UK markets.
Investments tend to thrive when outcomes are clear, but in the muddied waters of Brexit, the future direction of the UK’s economic landscape is far from discernible at present. That said, signs are emerging that overseas investors are embracing the positives of Brexit, with a significant upturn in activities from investors outside the UK into the nation’s hotels market.
Investor appetites are growing
New research published by Savills has shown that, far from Brexit having a negative impact on UK hotel investment, the first six months of 2017 witnessed record levels of financial influx, with £2 billion of investment in UK properties. What’s more, the full-year outlook for investment in the sector stands at £5.1 billion – a 28 per cent increase on levels witnessed in 2016.
Martin Rogers, head of UK hotel transactions at Savills, commented: “The UK hotel market has had a strong start to the year, as the sector remains resilient to the headwinds of the last six months.
“The favourable exchange rate has attracted overseas buyers that are looking for stable, long-term income. The anticipation of a softer Brexit will provide further comfort, encouraging development and relieving pressure on staffing.”
Indeed, weakness in the pound following the UK’s landmark vote to leave the EU in 2016 has made the UK a more attractive option for overseas buyers, with continued strength in the UK’s hotel sector making this a positive and reliable investment decision for many investors.
Shift in focus for overseas buyers
Overseas transaction volumes continue to make up a significant proportion of UK hotel market investment at present, with investors largely ignoring the saturated London market in favour of regional buy-ins.
Savills’ data shows a total of £2.2 billion in regional investment for the year to date (up to the end of September 2017), in comparison to just £1.3 billion in London. It marks a burgeoning trend for overseas buyers to focus on the UK’s regional hubs, with growing appetite for markets including Manchester, Liverpool and Edinburgh. Each region offers its own vibrant market for visitors, and investors are now recognising the benefits of investment as the UK’s attractiveness to both domestic and foreign travellers remains unabated.
Rob Stapleton, director in the hotels agency team at Savills, stated: “While some of the increased activity by investors in the UK regions is in response to a lack of available assets and price constraints in London, it also reflects an increased level of comfort among overseas investors with the regional markets, particularly key cities such as Manchester and Edinburgh.”
Overall, overseas buyer activity is also gaining strength in comparison to UK inward investment, making up 48.1 per cent of all transactions in the year so far. This increasing appetite by foreign investors is a positive sign for the UK hotels sector in general, with the latest statistics marking a considerable upturn from a market share of just over one-quarter (25.7 per cent) last year.
Asian investors coming to the fore
Indeed, figures recently published by JLL show UK commercial property transactions have become increasingly popular among Hong Kong and mainland Chinese investors, with this group among the most active for overseas investment into the UK.
High-profile deals including the £1.3 billion acquisition of the Walkie Talkie building by Hong Kong food conglomerate Lee Kum Kee and the £1.15 billion deal by Hong Kong-listed CC Land for ownership of London’s famed Cheesegrater are just some of the standout transactions from the last 12 months.
Singaporean buyers are also leading the charge to invest in UK property at present, as are those from South Africa and Thailand. However, as we’ve seen, it is not simply the London market that continues to attract a strong investor focus, with Starwood Capital’s purchase of the Holiday Inn Manchester City Centre for £54.5 million and Singaporean-based CDL’s acquisition of The Lowry Hotel Manchester for £52.5 million also registering as standout deals.
Although Brexit is now a reality that all must contend with, the current landscape appears extremely enticing for foreign investment, and is far from the doom and gloom that was expected in the months following the UK’s vote to leave. With ongoing favourable exchange rates and a burgeoning market across the UK, the time could now be right for more investors to take the plunge.