UK hotel investment rises 28% in Q3

Core Insights - The UK hotel investment market saw a significant increase in activity in Q3 2025, with transaction volumes reaching £1.04 billion, a 28% rise compared to Q3 2024 [1] - Despite the growth, overall investment volumes remain 5% below long-term trends [2] London Market Performance - London led the UK hotel investment sector with £697 million in transactions during Q3 2025, representing a 42% year-on-year increase [3] - The tightening of prime yields in London, which decreased by 25 basis points for franchise assets compared to the first half of 2024, indicates positive investor sentiment [4] Regional Market Growth - Regional UK markets showed strong performance, with Scotland's year-to-date transactions reaching £316 million, an 85% increase from the previous year [5] - The South West recorded £180 million, up 360%, while the West Midlands achieved £256 million, marking a 310% increase [5] - Collectively, regional markets accounted for £1.3 billion in transactions, more than double the total from the same period in 2024 [6] Investor Activity - Domestic owner-operators were particularly active, comprising 45% of the total transaction volume in 2025, amounting to £1.2 billion, a 77% increase compared to the 10-year average [7] - International asset managers re-entered the UK hotel sector, acquiring £734 million worth of hotels in the first nine months of 2025, with international players accounting for 60% of this total, marking a year-on-year increase of over 1,000% [8] - UK pension funds became more active, with year-to-date volumes at £299 million, up 31% year-on-year, driven by diversification strategies and confidence in long-term sector fundamentals [8] Market Sentiment - The first half of 2025 was characterized by operational and investor uncertainty, but sentiment stabilized through Q3, with over £1 billion in deals closed, a marked increase from 2024 [9]