Beds are top of the agenda for the global real estate investment community, according to the views of industry leaders.
While this might mean a liquidity upside for the hospitality segment, the beds narrative traverses a range of demographics, trends and demand curves supporting changes in investment allocations.
For international property funds, indeed, the appeal of a broad range of living niches, from student to senior living, plus the vast challenge of undersupplied housing markets, have become part of a necessity-based real estate story driven by secular tailwinds. Yet within this, hotels are increasingly holding their own for a generation of operationally-savvy investors that like the sector’s inflation-hedging characteristics.
“We’ve seen increased investment inflows in sectors that were once deemed alternatives but are increasingly part of the mainstream. Assets in sectors such as student living and hotels, which we specialise in, have become increasingly appealing to institutional investors,” said Jay Ahluwalia, principal director at family-owned Dominus, speaking at last week’s MIPIM event in Cannes.
Dominus has built a multi-billion hotels and student accommodation business in the UK, focused around “the development and operation of best-in-class assets in prime locations, especially in key cities where there are structural supply issues”.Ahluwalia added: “There will be increased interest in the operationalisation of real estate, with more and more operators looking at a platform approach to drive efficiencies and a higher return on investment, which is especially attractive at times of uncertainty.”
Living sector appeal
Lee Coward, VP, Investments Europe at Oxford Properties, said that he expects to see continued strong interest in the living sector, both from the occupational and operational income side which have “performed phenomenally well in recent times”.
He noted that despite the structural shortage of housing of all types, especially in the UK, institutional investors remain underweight in the sector, which was another factor influencing demand.
Christof Winkelmann, chief market officer at real estate lender Aareal Bank, said that European hospitality remained a lending target for the group, referencing a recent €200 million loan for five Hoxton and Mama Shelter branded-hotels in Amsterdam, Edinburgh, Florence, Prague and Rome. Yet emerging sectors, backed by tailwinds, are also of interest to the German bank, which will look to debut in data centre lending and add more living to its investment portfolio in 2025. Within the bank’s home market of Germany, Winkelmann predicted further recovery in hospitality markets this year, backed by German government economic stimulus.
Real estate investor Stoneweg is another firm studying data and beds. “We are looking forward to exploring how we can apply the deep expertise of the expanded platform in living and logistics to new markets and discussing investment prospects in hospitality and data centres, which are also major targets for us this year,” he said.
Asoka Wöhrmann, CEO of global asset manager Patrizia, agreed that the megatrends of digitalisation, urbanisation, energy transition and living would be key to driving the sector’s recovery and unlocking new investment opportunities this year.
“The convergence of real estate and infrastructure is creating a new emerging asset class that we call ‘RE-infra’,” he said. “As cities become more connected with technology reshaping urban connectivity, mobility and energy efficiency, investors will increasingly look beyond traditional real estate towards smart real asset solutions that offer resilience, adaptability, and stable attractive returns.”
Alongside this “flight to smart assets”, he predicted, technology will play an equally critical role in shaping the sector’s evolution as AI, digital twins and data analytics move into the mainstream for asset managers.
Evolving assets
At the intersection of hospitality and living, branded residential remains a hotly source niche, according to Chris Jones, chair of global architectural practice 10 Design. He said that this segment is continuing to redefine and evolve the definition of luxury, at a time when hotel guests are prioritising experience over goods. He added that it was also proving successful for meeting guest expectations around flexibility. The topics of sustainability are also shaping investment trends, including adaptive reuse and retrofit, he noted. “Although not yet fully adopted by the industry, these are attracting increasing investment due to the growing issue of ageing building stock worldwide,” he noted.
The need to redevelop or convert aging offices was identified as a key topic by Adriana Paice Kent, founder and chief executive of asset enhancement specialist firm Woven Spaces. She noted that the industry’s latest challenge was to find new uses for “office spaces at risk of obsolescence”.
Stephane Bensimon, chief executive of multinational co-working space provider WOJO, also identified an upside for hospitality as workplace trends evolve. He said that there was a “big conversation” going on within the hotel industry about how to adapt to new working patterns, with co-working spaces ideal amenities for hospitality assets. He added: “There are many possible benefits. It’s a way for hotel owners to optimise their square metres. It’s a nightmare for hoteliers to see lots of square metres not being used all day long… Everybody is looking for optimisation of their working spaces.”
Bensimon was speaking alongside B&B Hotels chief sustainability officer Sophie Donabedian, who discussed the French company’s vision to deliver hospitality spaces that are more “embedded in their environments and ecosystems”.
Geopolitical challenges
While real estate seeks solutions to demographic matters, the industry continues to grapple with sector-adjacent problems fuelled by geopolitics and economic dislocations. Chief among these remain labour shortages, driving construction inflation across the industry and complicating the search for talent.
Sylvie Bergeret, chief operating officer of hospitality specialist MKG Consulting, said that she saw the issue remaining top of mind this year, noting that budget hotel occupancies are often supported by real estate construction worker stays, meaning that their absence reduces profits. This has contributed to Europe’s uneven market, she said, with hotels booming in Spain and Italy due to tourism flows, leaving markets like Germany slower to pick up.
Beatrice Guedj, head of research and innovation, Swiss Life Asset Managers France, suggested that Europe needs to aim for a more even recovery pattern to find its collective edge, referencing perceptions that that new US administration has cooled as a European ally. It’s a wake-up call and it may mean a new Cold War, however at least that is a more stable backdrop,” she said. “But you can’t make Europe great again without making Germany great again, because it is the first economy of all the countries in the EU. So, the fact that the new German administration is looking to be more flexible with its economic rules is encouraging.”