London is the biggest growth market with just under 3,000 units in the committed pipeline, reflecting a 26.7 per cent expansion on current stock levels, followed by Munich with a pipeline of just over 1,000 units.
Beyond these two cities, key regional and emerging destination cities in Europe such as Istanbul, Manchester and Glasgow are leading the way.
Savills says this reflects a combination of rising developer and investor awareness of the sector and its operators, alongside operator appetite to expand into new, relatively under served markets.
The report says Adagio Aparthotels, Staycity and edyn are the largest groups in supply terms in Europe, helped in part by significant stock expansion over the last three years. They will also continue to be key players in future growth.
Based on committed pipeline, these three groups account for 22.9 per cent of the total pipeline, representing an average growth in stock of 45.1 per cent over the next three years. For edyn and Staycity this expansion will be driven by their core brands (Locke and Staycity), while for Adagio Aparthotels it is the Adagio access economy brand that dominates future pipeline.
Transaction volumes in the European serviced apartment market reached €496.6 million in 2021. The UK remained the biggest market, accountable for a 47 per cent share of volumes, in line with the five year average of 46.6 per cent.
While total volumes were down 42.9 per cent on the previous year, this was off a particularly strong 2020 where volumes increased 8.4 per cent on 2019. Benchmarked to 2019 pre-pandemic levels, 2021 activity was down 38.1 per cent, however this was in line with the wider hotel market where volumes were down 36.5 per cent. While the weaker transactional activity on a year-on-year basis can be partly linked to some trepidation around the wider hospitality market due to the pandemic, it has been stock availability that has been the biggest challenge to activity.
Savills says the leaner cost structure of serviced apartments coupled with the relative operational resilience during the pandemic has emphasised the sector’s less volatile cashflow, relative to the wider hotel space. This has generated heightened interest and confidence amongst investors. PwC and ULI’s latest emerging trends survey reinforces this point. When asked about investment prospects in 2022 by sector, respondents ranked serviced apartments six positions higher than hotels (ranking 16th out of the 27 sectors covered).
Since 2018, institutional buyers (including cross-border acquisitions) have accounted for a 56.1 per cent share of European serviced apartment transactions, exceeding the 50.9 per cent share recorded for hotels. This is a sizeable increase on historical share. For example between 2013 and 2017, institutional capital accounted for 39.1 per cent of volumes.
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