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September 2016 | Hotels as the new passion

With the continuing run on German real estate, local hotels have also become the focus of investors from all over the world. Where this type of real estate was once seen by most as too risky, in the first half of 2016 alone investors have acquired hotels in the German market with a value in excess of two billion euros. This is 35 per cent more than in the same period last year. “Hotels have meanwhile become an asset class in their own right in the German investment market,” confirms Gordon Gorski, Managing Director of HOCHTIEF Projektentwicklung GmbH, adding, “They are particularly popular with institutional and private investors.”

The Handelsblatt newspaper offers an overview of the market situation. The volume of transactions in the first six months represents an impressive new half-year record. Because between 2006 and 2015 average six-monthly investment in German hotel real estate was a mere 764 million euros. In the meantime the big open real estate funds and insurance companies have fallen in love with hotel real estate. For instance, in buying Height3 at the Hamburg Heights development on Hamburg’s “Spiegel Island” from HOCHTIEF Projektentwicklung, Commerz Real acquired an Adina four-star apartment hotel for its open real estate fund hausInvest. Even risk-averse pension funds are now acquiring hotels for their real estate portfolios. The reason: “Yields are 50 to 100 base points above comparable office yields. So adding hotels to the funds is attractive,” Gorski explains. 

Apart from Height3, HOCHTIEF Projektentwicklung is currently building three other hotels—Height4 as a Premier Inn, also on Spiegel Island, the Capri by Fraser in Berlin, and a Motel One-brand budget designer hotel in Cologne. All three hotels were bought by their respective operators. Gorski notes that this is a trend: “More and more foreign market players are elbowing their way onto the German market, particularly with the strategic aim of securing themselves a place here under any circumstances. They are meanwhile acting not only as operators but also as investors.” So the once despised hotel market has become attractive.

Link to the article "The new passion” (premium article, only in German language available)