Investment prospects for serviced apartments
Serviced apartments occupy a unique space between conventional rental residential properties and hotels – studios or
According to HVS, over 10,000 serviced apartments will be built in Europe between the middle of 2017 and 2020. 37% of them will be commissioned by late 2017, 28% in 2018 and 25% in 2019. Each building has 18 to 300 apartments, and 120 apartments on average. The UK and Germany have the highest supply volumes (41% and 32% respectively).
Transaction values in the serviced apartment and apartment hotel market are often not disclosed, just like the information on buyers and sellers. In Europe, prices start from €100,000.
|Company||Business model||Brand||Presence||Number (2016/2017)|
|of locations||of units|
|Accor (France)||Rental agreement, management agreement, franchising||Adagio||Europe, Brazil, United Arab Emirates, Qatar||110||12,000|
|The Sebel||Australia, New Zealand||16||>1,600|
|Suite Novotel||Australia, Asia, Middle East, Europe, North America, South America||33||>4,100|
|International Hotel Group (United States)||Management agreement, franchising||Candlewood Suites||United States||341||>32,300|
|Staybridge Suites||United States||220||>23,900|
|Frasers Hospitality (Singapore)||Fraser Residence||Asia, Europe, Middle East||13||>1,500|
|Fraser Suites||Asia, Africa, Australia, Europe, Middle East||29||>5,000|
|Fraser Place||Australia, Asia, Europe||16||>3,000|
|Capri||Australia, Asia, Europe||8||>1,750|
|Marriott (United States)||Management agreement, franchising||Residence Inn by Marriott||United States, Canada, Europe, Middle East, Latin America||750||95,000|
|Marriott Executive Apartment||Asia, Africa, Middle East,||25||>3,300|
|TownePlace Suites||United States, Canada||278||>28,000|
|Pierre & Vacances (France)||Rental agreement, management agreement||Pierre & Vacances||Europe||226||>20,000|
|The Ascott Limited (Singapore)||Ascott The Residence||Asia, Australia, United States, Brazil, Europe, Middle East||>45||>8,000|
|Somerset||Asia, Australia, United States, Brazil, Europe, Middle East||>80||>15,000|
|Citadines Apart'Hotel||Asia, Australia, United States, Brazil, Europe, Middle East||>95||>15,000|
Occupancy and yield rates
Rental rates for serviced apartments are often
Serviced apartments often have higher occupancy rates (84% in 2016, according to HVS) compared to hotel properties in general (70% in 2016, according to Statista).
In addition, apartments offer more money-making opportunities. For instance, according to JLL, hotels yield from
The net guaranteed yields operators offer to the end investors are usually lower. For instance, Adagio, Pierre & Vacances and RésidHome apartments in France offer 4% per annum, after maintenance and management expenses (excl. VAT).
According to JLL, serviced apartment operating expenditures average 40% of revenue compared to 60% for hotels for two reasons: most apartment hotels do not offer breakfast and clean the rooms weekly, not daily like in hotels.
(% of revenue)
|Rental term (days)||365||1–2||1–365|
|Number of staff||1 administrator||1 staff
According to a survey by PwC, serviced apartments are among the top 10 investment property types in 2018.
Analysts from international property brokers Tranio believe this segment is promising for investment, especially in markets with a price growth potential. Tranio is converting a building in Athens, Greece into an apartment complex with a local developer, and will rent out units
This is a promising opportunity for the following reasons:
- Residential properties have low risks and time expenditures: a Greek property management company is in charge of the lease and maintenance of the apartments.
- Each apartment has a rental license
- Investors can yields of up to 7% by leasing the apartments via Airbnb.
- When investing at least €250,000, buyers and all their family members are provided with residence permits that can be extended remotely every five years. There is no requirement of stay for permanent residence in Greece.
Originally published on Globalrealestateexperts.com