Demand soars for serviced apartments

The serviced apartment market has the potential for significant growth in the London lettings market, according to research from property consultancy CBRE.

It says that although the market is still in its infancy, serviced apartment operators have diversified to appeal to both tourist and business audiences, leading to some resilience against the economic downturn.
 
CBRE has identified 30 serviced apartment operators in London with a combined total of over 7,000 units, but with a shortfall in overnight accommodation of nearly 20,000 units.
 
It says that central London freehold serviced apartment blocks in good condition are achieving yields of between 6% and 7%.

Despite slight falls during the traditionally slower winter months, it says demand for serviced apartments has been rising steadily since 2009. Occupancy and rents have both been on an upward trajectory as a result, with rents currently 7% higher than this time last year.
 
Serviced apartment blocks are spread across London, but large clusters tend to exist in central locations with the West End accounting for 4,000 units alone. The serviced apartments currently make up just under 10% of the hotel market.
 
Jennet Siebrits, head of residential research at CBRE, said: “Holidaymakers, attracted to the UK because of the favourable exchange rate, have switched from hotels to better value apartments.
 
“Different audiences have different requirements. Our analysis shows that rents for smaller units are highest in the City at just under £1,000 per week on average, while weekly rents for studios in Kensington and Chelsea are lower at £911.

“Tourists, who are naturally more attracted to boroughs like Kensington and Chelsea, require larger, family-sized units, and operators needed to react accordingly.”