Office to hotel conversions made up fifth of UK hospitality investment

Office to hotel redevelopments accounted for a fifth of the £2.4 billion invested in the hospitality sector in 2023, data from Cushman & Wakefield has revealed.  

More than £2.4 billion of UK real estate was transacted by hotel investors in 2023 over 149 properties across the UK, representing 14,255 rooms. Total investment - despite being aided by volumes in the final quarter which were up 97 per cent year on year at £745 million - was down compared with 2022’s £3.4 billion.

Notably, £500 million of transactions comprised office sites which are slated to be converted into new hotel accommodation, with these plans backed by several local authorities including in the City of London.

In terms of capital deployed, private buyers were the dominant force in deals completed at 67 per cent, while institutional-backed capital, at 14 per cent, shrank dramatically compared with the previous year. Domestic buyers represented more than half of deals, followed by those from Europe at 26%.

Why it matters

Office to hotel conversions garnered increasing attention last year, and the trend is set to continue in 2024. Speaking with Hospitality Investor, experts from Colliers, JLL and Christie & Co agreed office to hotel conversions will become more popular especially in cities like London and Edinburgh.

What they said

Ed Fitch, head of Hospitality UK & Ireland at Cushman & Wakefield said: “Looking ahead, overnight stays in hotels are projected to surpass 2019 levels in 2024, with domestic overnights up by double figures. Cross-continental demand recovery, especially from the Asian and the American markets, should provide further support to this upward trajectory.

The difference between bids and asking prices is showing signs of narrowing, whilst macroeconomic uncertainties dissipate as inflation improves and rate cuts appear on the horizon. Loan maturity is also likely to drive an uptick in activity across 2024, meaning several assets should be brought to market.”