Interest from foreign capital drives London hotel prices to pre-crisis level

London trophy hotels continue to attract foreign capital as London remains the main focus of UK investment activity with market stability being reflected in the low yields for hotels acquisitions, typically ranging between 4 and 5 per cent. Investment volumes in London at year end 2012 totalled £1 billion reflecting 56% of total UK investment volumes of £1.8 billion.

Jon Hubbard, CEO Northern Europe for the Hotels & Hospitality Group at Jones Lang LaSalle said: "Despite the economic challenges it faces, the UK remains Europe's most active hotel investment market and interest remains in key assets in prominent locations. Notable sales in 2012, such as the 4-star Cavendish Hotel which sold for £159 million, have shown that for the right assets in the right location, investors continue to pay high prices."

Due to London's international appeal, ownership is very diversified and only 53% of the 4 and 5 star hotel bed stock is owned by UK residents. Asian owners are the second largest group and constitute a market share of 18%, having significantly increased their presence in recent years, with European ownership accounting for 12% of the total. The share of Middle Eastern ownership in the upscale segment is 7%, increasing significantly following a number of notable transactions in 2011.

Jon Hubbard, CEO Northern Europe at Jones Lang LaSalle concluded: "The fundamental strengths of London as a leading business city globally, together with continued growth in leisure tourism, have created stable operating conditions which have made London a magnet for foreign capital and we have witnessed a growing interest from Asian and Middle Eastern investors. These equity rich investors, often HNWI's or sovereign wealth funds, have focussed predominantly on 4 and 5 star hotels and, supported by growing profitability, have driven prices in the market segment back to pre-crisis levels"