Savills has released its autumn 2010 report on the serviced apartment industry. The company’s findings, following research detailed in similar reports in 2008 and 2009, sketch a picture of a strong industry with significant prospects for growth. However, Savills argues that reluctance to invest in the industry is restricting its expansion.
Savills, a large international property services company, is a respected business within the UK’s property industry. Its continuing research into the serviced apartment sector is indicative of the growing importance of the sector and its increasingly visible profile in the business travel industry.
The company’s autumn 2010 report surveys the serviced apartment industry as it stands today and makes a number of confident assertions about its future. According to Savills, the sector is now recovering after a comparatively slower period in 2009: the report forecasts a 6% increase in annual visitor numbers from now through 2011. The market peaked in 2006 to 2007. From a SilverDoor perspective, however, our business has continued to experience significant growth between 2006 and 2009.
The findings suggest that the economic downturn has had a mixed effect on the industry. Delayed or abandoned development projects can make finding expansion opportunities difficult, while companies seeking to develop their own projects also struggle, thanks to a lack of investor interest in an industry Savills describes as ‘still relatively unknown’. However, as businesses continue to carefully consider expenses, serviced apartments – often the most cost-effective option for longer stays – are likely to remain in demand. We think it’s worth adding that the economic situation has also created new opportunities, since many new serviced apartment buildings have only come about as a result of much lower prices and liquidations.
Traditionally the serviced apartments London has to offer, particularly in the central areas, have dominated serviced apartment supply and the report indicates that this remains the case: central London currently has 6,284 units. What Savills calls ‘safer’ areas such as Mayfair, Chelsea, Knightsbridge and the City are still the main sites of growth, although according to the report operators are beginning to look to other areas for development opportunities. Meanwhile, the study finds that outside London supply of serviced apartments is concentrated in key regional towns and cities, particularly those with a significant presence of international corporations.
The report finds a nationwide shift towards shorter stays of under one month. This is most apparent in London, where 59% of stays during the first half of the business year were for less than a month. The Midlands accounted for 22% of all stays over 6 months over the last two years.
Savills used data from a variety of sources for their research. SilverDoor and another serviced apartment agent (which also manages a large portfolio of serviced apartments) supplied information on demand and supply in central London and nationwide.