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City's growing popularity

Glasgow’s appeal puts it top of hotel deals league

Glasgow airport hotel

A five-storey hotel is to built at Glasgow Airport Business Park

Glasgow’s growing popularity as a tourist and events destination has seen it top the list of hotel transactions in Scotland and third highest in the UK.

A new study found there were about £260 million-worth of hotel deals last year in Edinburgh, Glasgow, Aberdeen, and Inverness. Glasgow accounted for £170 million across nine transactions.

Beyond the four main tourist destinations there was also significant deal activity, with 12 assets changing hands for approximately £115m.

The sale of the Fairmont St Andrews was the biggest deal of the year in the Scottish ‘secondary’ market, contributing around 45% of the total investment figure.

The data is contained in Knight Frank’s UK Hotel Capital Markets Investment Review 2020.

John Rae, head of the property consultancy’s Glasgow office, said: “It’s been a strong year for investment in Glasgow hotels – a reflection of the fact that it is emerging as a highly desirable tourist and events destination.

“The arrival of the COP26 United Nations climate change conference later this year is indicative of the scale of events that Glasgow can now host and it is a huge opportunity to highlight all the city has to offer.

We expect hotel investment activity to remain strong in the years ahead

– John Rae, Knight Frank

“There are a substantial number of hotels rooms to be added in Glasgow over the next few years, with a range of well-known and boutique operators confirmed or planning new premises in the city.

“As they come on stream, we expect hotel investment activity to remain strong in the years ahead as investors increasingly look to alternative property assets.”

The Knight Frank report also found that hotel deals in Scotland have been boosted by the growing popularity of ‘ground rents’ transactions in recent years – a form of sale and long-term lease back deal that involves delivering steady income for investors and guaranteed access to a property for a hotel operator. 

According to the firm’s analysis, ground rents transactions have accounted for around £100m of assets over the last three years, including the Hotel Indigo Glasgow, Marriott Moxy Aberdeen, and Apex Edinburgh – a noteworthy uplift on previous years. 

Alasdair Steele, head of Scotland commercial, added: “We have seen a significant increase in the number of ground rents deals since 2017, as investors seek out sources of secure, long-term income and hotel operators look to free up cash to invest in their businesses.

“They are also proving popular with similar types of occupiers, including the student accommodation and healthcare sectors. We expect ground rents to grow in popularity in Scotland, both among investors and occupiers in line with the rest of the UK.”

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