Opinion

London Serviced Apartments Prime for Investment

The serviced apartment sector in London is prime for property investment and looks set to thrive into 2013. According to research from the CBRE, there are now 8,000 apartments in the centre of the capital and rents are continuing to grow, rising by 25 per cent in the space of a year to an average of £1,214 per week. In the sought after areas of Kensington and Chelsea, this can rise to £2,959 for three bedroom apartments.

Currently, the majority of serviced apartments are concentrated in the West End, the City and Canary Wharf. However, with demand continuing to rise, new developments are in the pipework as far afield as Ilford. Nevertheless, with the sector driven by leisure and corporate needs, the most popular locations are likely to continue to be central and competition for prime stock will be high.

Occupancy rates have skyrocketed to 90 per cent, outstripping average overall occupancy rates for the hotel sector and demonstrating the strength of such assets. Although still much smaller than its global counterparts, the serviced market also enjoys greater domestic demand than anywhere else in Europe. With over a third of tenants coming from within the UK, it seems people are certainly getting a taste for serviced apartment living.

Jennet Siebrits, head of residential research at CBRE, stated: "Preferences are changing for tenants, travellers and workers alike, as more look for a home from home rather than a luxury hotel. Factors such as more space, self-catering and lower rates than hotels are playing a large part in the boom of the serviced apartment market in London.

"It is fast becoming a preferred option for investors too, as rents and yields for well-located developments have performed well over 2012. Our research suggests Canary Wharf remains a strong investment opportunity, with yields in excess of seven per cent expected for 2013." Ms Siebrits added that serviced apartments also offer lower operational costs for investors considering entering the hotel market, which boost return on investment potential.

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