UK hotel construction slows as delayed projects complete
Costar stated that the UK remains an attractive market for many brands and operators given its maturity and accessibility into the European market
The UK currently has around 22,500 hotel rooms under construction and expected to enter the market by the end of 2026, with most due to open next year, according to data from CoStar.
Higher construction costs and an elevated interest rate environment have been affecting new development funding and resulting in a slowdown of construction in recent months.
However, construction of new hotel rooms has not dropped significantly as a result of construction delayed by the pandemic being completed.
London remains on top in terms of number of under construction rooms and in final planning, however regional markets have been driving supply growth as a share of inventory.
Glasgow, Liverpool, and Leeds have the highest supply-side risks as under-construction rooms present between 8% and 10% of the existing stock.
Meanwhile, Northern Ireland and Edinburgh have a growing final planning pipeline which could provide pressure on hotel stock should they all break ground.
Development of new rooms is expected to slow in the next few years as current plans are completed.
Costar stated that the UK remains an “attractive market” for many brands and operators given its maturity and accessibility into the European market.
It confirmed developer interest is likely to continue although the way hotels are developed may be slightly different in light of the current economic environment and future sustainability requirements.
Cristina Balekjian, director of Hospitality Analytics, UK at CoStar, said: “Development activity is expected to slow once under construction projects are completed and given the higher inflation and interest rate environment. Due to challenges around new construction, there has been a rise in conversion activity, however, which is likely to continue, especially given the increased vacancy in retail and office properties presenting opportunities for hotel conversions.
“The UK remains an attractive market for many brands and operators given its maturity and accessibility into the European market. Developer interest is likely to continue although the way hotels are developed may be slightly different in light of the current economic environment and future sustainability requirements.”
