North West a key region for hotel investment activity in 2021

Hotel Brooklyn

The North West of England recorded more than £300m of hotel transactions in 2021, from some 23 deals and was ranked as the third most liquid region in the UK, excluding London.

According to the latest UK Hotel Capital Markets: Investment Review 2022 from global property adviser Knight Frank, Manchester accounted for 73% of this regional activity with seven hotels transacting including the 338-bedroom Macdonald Manchester Hotel sold to Zetland Capital Partners and Tristan Capital partners’ EPISO 5 Fund acquiring the Qbic Hotel Manchester, since rebranded as Yotel Manchester Deansgate.

Liverpool, meanwhile, attracted a further 18% of the transaction volume in the North West, totalling more than £53m of investment, with three deals transacting.

The most significant deal involved the first regional forward funding agreement since the start of the pandemic, with Aviva Investors providing funding to Valorem Investment Partners for the 260-bedroom, four-star Maldron Hotel, pre-let to Irish operator Dalata on a 35-year, inflation linked lease.

This level of investment activity reflects the strong and growing investor confidence in regional UK hotels and further demonstrates investors’ flight to prime, gateway cities, with long term appeal, a wide base of international and domestic guests and a more balanced segmentation mix.

Knight Frank’s research reveals that the composition of transaction activity was vastly altered compared with historical trends. While hotel transactional activity for the North West was at 40% of the 2019 level, this was largely due to a notable absence of portfolio activity and relatively few higher value assets transacting across regional UK.

Instead, transactional activity during 2021 illustrated the intense demand for quality hotels in strategic, strong leisure-based locations. Hotel transaction volumes recorded in the Lake District National Park is testament of this trend, with this top leisure destination witnessing some eight hotels transacting, totalling more than 250 rooms and contributed to in excess of 6% of the region’s total investment volume.

Knight Frank reveals that some 46% of hotels which transacted in regional UK in 2021, were located in a rural/coastal/resort or private estate setting, equating to approximately £600m of transactional volume. The property adviser sold the Hotel Bristol in Newquay to North West-based developer Salboy.

The transaction demonstrated the heightened investor demand for hotels located in strong staycation locations, with competitive bidding leading to multiple offers and the hotel selling in excess of the guide price.

In total the UK hotel market saw investment volumes reach an impressive £4bn in 2021, an uplift of 110% versus the previous year, with London seeing the bulk of the deals, followed by Edinburgh and Manchester.

This year has already brought significant investment with Singaporean investor CDL Hospitality Trusts paying £24m for Hotel Brooklyn on Portland Street in Manchester city centre. The investor also owns Salford’s Lowry Hotel.

David Porter, from Knight Frank Manchester, said: “The regional UK cities have strong fundamentals and a broad and diverse appeal which continue to attract investors. Manchester continues to thrive, underpinned by several mixed use urban regeneration sites where we expect culture and sport to play a major part of their draw to occupiers, including projects like ID Manchester,  Mayfield Park and The Factory coming online later in 2022/23.”

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