What’s changed over the last few years? Investment trends incomparably have changed – we are talking precedent changes that are based on how we want to live our lives, plan our future and our children’s future.
For many years’ landlords were happy owning a mainstream property asset with a short lease, living in a low-yield environment and taking responsibility for their property on a self-manage basis. However, many landlords are turning investor, and are searching for opportunities beyond the mainstream sectors. These investors are focusing on the highly lucrative, aggressively expanding Serviced Apartment and short-term let market.
Serviced Apartment Providers & Savills sentiment
According to the latest Association of Serviced Apartment Providers (ASAP)/Savills sentiment survey, overall sentiment in the serviced apartment sector has improved considerably since November 2018 and even again since June 2019. In net balance terms, this equates to 39%, the highest net balance of positive responses of all sentiment surveys. The results are also significantly up on the November survey last year.
Highlights from the survey include:
- Demand from corporate guests has improved
- Expansion plans stay the same as per June 2019, meaning no decrease, nor an acceleration
- The survey highlights that respondents anticipate guest demand to become more international over the next six months.
Liverpool & Manchester: Serviced Apartments
REW specialises in serviced apartments for its clients as Sajid Kazmi, Senior Investment Expert explains, “We feel short term lets have bought a new lease of life into the residential buy to let market. When you can increase a property’s income from 5% to a much more attractive 10% net yield, this will increase the value to investors by 50% or 60%.
“A property’s income on short lets is circa 10% net yield,
this increases investors ROI by 50% – 60%.”
“It means that regardless of the market you can bank on an increase in property value and income. Take Liverpool’s stats for hotels and short stay apartments, they are exceptional, with Price Waterhouse Cooper and Colliers showing an increase in occupancy and both other main indicators (RevPAR – Revenue per room, and GOPPAR profit per room) rising faster than anywhere in the UK in the last year. That means the nightly rates in Liverpool are rising, and the occupancy rates are going up. This is why some of our investors made above 12% last year”
Liverpool UK’s 2019 hotspot
Colliers’ UK Hotel Market Index balances occupancy with revenue-per-room to rank the best performing hotel cities in the UK. They named Liverpool, along with Edinburgh and Belfast in the Top 3 hotspots for hotel and serviced apartment investment out of 34 UK cities. Making Liverpool, England’s best city for hotel and serviced apartment investment.
“Liverpool named England’s best city for
hotel and serviced apartment investment”
Marc Finney, head of hotels and resorts consulting at Colliers International, said: “This year’s Index shows a strong performance for the North West of England.”
Marc Finney also cited “strong growth in both occupancy and average daily room rate” and points to Liverpool having four consecutive years of growth in room rates and occupancy as evidence of this being an established trend. He highlights “improved market appetite [for short term accommodation] and relatively low land site prices”, as reasons why the yields are the best in UK.
Breaking it down further in to the occupancy and revenue categories: Liverpool ranked in the top four UK cities for occupancy along with London, Edinburgh and Oxford, with a rate of 81.8%, up from 78.7% the previous year. It ranked first for revenue per room (RevPAR) up 7.3% over the past four years, higher than Edinburgh, Belfast, Birmingham and Plymouth.
When you consider that properties and land in Liverpool are less than a third of the price of properties in Oxford and Cambridge [Hometrack], but nightly rates and occupancy rates are in the same bracket as those cities; you can see why the smart money is going to Liverpool. In fact, of all the top ranked cities Collier’s places Liverpool in the best three for development costs, so its cheaper to buy there and you get some of the highest occupancy and nightly rates in the country.
“it’s cheaper to buy in Liverpool but with some
of the highest occupancy and nightly rates in the country”
Another person to post glowing figures for the cities sector was Councillor Wendy Simon; Liverpool’s Assistant Mayor and Cabinet Member for Culture, Tourism and Events. She stated in Liverpool’s 2019 hotel report – jointly published by Liverpool City Council and the Local Enterprise.
Liverpool’s hotel sector has seen another year of steady growth and sustained upsurge in rooms sold, average occupancy and room rates. 2018 has smashed through the ceiling of 2 million rooms sold as it did in 2017, with almost every month showing increased numbers of visitors stay over in the city. Our weekday occupancy figures have seen a welcome and healthy increase this year. We are keen to see this figure improve further.
Manchester’s GOPPAR 2019 high
The growth in demand for hotels and serviced apartments in Manchester is due to its place as a key international city, with an international airport and reputation.
Every year it hosts many high-profile events and in 2019 these included The Conservative Conference, the Nuclear Science Conference hosted by Sydney the previous year, and the ICC 2019 Cricket World Cup.
“2019 Manchester hotels to drive a 12.5% increase in profit per room”
These as well as many major companies relocating to Manchester caused a significant increase in visitors to the city and enabled hotels to drive a 12.5% increase in profit per room, which was on the back of an 8.9% increase in RevPAR, to around £130 per night.
This was more than £5 higher than the previous RevPAR peak recorded in the city, in October 2018.
With Manchester set to host the British Athletics Championships in 2020, as well as International crickets for both T20 and The Ashes, and the National Boxing Championships, it looks set for another strong year of growth.