155% hike in London hotel investment market in Q1 2014

Q1 hotel investment figures released by JLL show a 155 per cent increase in the London hotel investment market in Q1 2014 compared to Q1 last year and a 33 per cent rise in Asian investment into the capital's hotel market compared to Q4 2013, with private equity firms making up over a quarter of the investment total.

Total investment in the London market for this quarter stood at £527.8 million, up by 8 per cent from Q4 2013 and 155 per cent from Q1 2013 when it stood at £207.2m.

The largest source of investment in Q1 and Q4 came from the UK domestic market, although the percentage fell by 39 per cent from Q4. The highest jump in terms of source of investment money came from Asian buyers, rising from 0 per cent to 33 per cent between two quarters. There was also a 5 per cent increase from Middle Eastern markets.

Drivers of Asian investment include an increase in Chinese property developers ploughing money into real estate projects following a relaxation of restrictions imposed by its government on Chinese companies investing overseas, as well as a broadening of the types of funding allowed.

In terms of investor type, private equity, investment funds and sovereign wealth funds had the largest share of the investment market in Q4. Private equity and investment funds have remained dominant between the quarters, although with a reduction in market share of 43 per cent. Sovereign Wealth funds made up 28.4 per cent of Q1 investment this year, compared to 0 per cent last quarter.

George Nicholas, Executive Vice President in JLL's Hotels & Hospitality group commented: "Investors are increasingly seeing the UK, and London in particular, as a top prospect for investment activity. Q1 figures bear this out and it is interesting to see the rise in Asian investment. London is appealing for the maturity of its market, its trophy assets and the post-Olympic boom and low cap rates. We expect to see more high net worth individuals and sovereign wealth funds targeting acquisition of trophy assets in London, an example of which was the recent purchase of the London Marriott Grosvenor Square by Hong Kong based fund Joint Treasure, where JLL acted for the vendor, Strategic Hotels & Resorts.

"The key driver of increased Chinese and Hong King interest in to the UK is the slowing of the Chinese economy of its previous highs, and the restoring of confidence in the European capital markets. Intelligent capital always anticipates and chases the next cycle and it's no surprise to see Asian and Middle Eastern capital being assessed to the base of domestic funds deployed in the lodging sector in the UK."​