News

Operational real estate investment doubles

News

Shifali Gorka

06 November 2024

Hotels, Investment/finance

Investment in operational real estate such as hotels, healthcare and self-storage has more than doubled, with expectations high for sustained momentum into 2025.

Operational real estate investment in the UK totalled £6.3bn as of the end of September, according to CBRE. That figure is a 102% rise on the same period in 2023, with a further increase in investment activity anticipated next year.

In the third quarter, such deals accounted for close to a fifth of all real estate investment, up from 8% during same quarter last year.

In healthcare, investors put £560m to work across the UK in the third quarter, an 83% rise compared to Q3 2023.

The self-storage sector is set to post record-breaking transaction volumes for a fourth straight year. The sector has already transacted £510m across the UK, with an additional £100m under offer and expected to close within the year. CBRE said demand is no longer limited to operators and value-add investors but now also to core-plus capital drawn by the sector’s stable, long-term, inflation-linked cash flows.

In the hotel sector, investment volumes reached £3.9bn in the first half of 2024, split evenly between London and regional markets. However, the third quarter saw a dip in transactions to £700m. The biggest Q3 transactions were Pandox’s acquisition of three Residence Inns from Starwood for £230m and Millemont’s purchase of the Yotel Edinburgh, also from a Starwood Capital affiliate.

CBRE expects to see a shift back towards single-asset transactions and fewer portfolio deals in 2025, likely leading to a slight decline in total investment volumes.

David Batchelor, managing director of operational real estate at CBRE, said: “We are continuing to see a resurgence in operational real estate investment activity across key sectors, with healthcare, hotels and self-storage leading the pack. As economic conditions show signs of improvement, we expect to see a further rise in activity in 2025 and ongoing positive sentiment for investors and operators.”

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operational real estate

Investment in operational real estate such as hotels, healthcare and self-storage has more than doubled, with expectations high for sustained momentum into 2025. Operational real estate investment in the UK totalled £6.3bn as of the end of September, according to CBRE. That figure is a 102% rise on the same period in 2023, with a further increase in investment activity anticipated next year. In the third quarter, such deals accounted for close to a fifth of all real estate investment, up from 8% during same quarter last year. In healthcare, investors put £560m to work across the UK in the third quarter, an 83% rise compared to Q3 2023. The self-storage sector is set to post record-breaking transaction volumes for a fourth straight year. The sector has already transacted £510m across the UK, with an additional £100m under offer and expected to close within the year. CBRE said demand is no longer limited to operators and value-add investors but now also to core-plus capital drawn by the sector’s stable, long-term, inflation-linked cash flows. In the hotel sector, investment volumes reached £3.9bn in the first half of 2024, split evenly between London and regional markets. However, the third quarter saw a dip in transactions to £700m. The biggest Q3 transactions were Pandox’s acquisition of three Residence Inns from Starwood for £230m and Millemont’s purchase of the Yotel Edinburgh, also from a Starwood Capital affiliate. CBRE expects to see a shift back towards single-asset transactions and fewer portfolio deals in 2025, likely leading to a slight decline in total investment volumes. David Batchelor, managing director of operational real estate at CBRE, said: “We are continuing to see a resurgence in operational real estate investment activity across key sectors, with healthcare, hotels and self-storage leading the pack. As economic conditions show signs of improvement, we expect to see a further rise in activity in 2025 and ongoing positive sentiment for investors and operators.”