throughout 2024 and beyond until the policy is inevitably tightened .
TRANSITIONING TO HOTELS According to data from Cushman & Wakefield , office-to-hotel redevelopments accounted for a fifth of the £ 2.4 billion invested into the hospitality sector in 2023 . Though employee behavior has changed as a result of a post-pandemic shift , international tourism is on its way to recovery . Thanks to the relative weakness of the pound , overnight stays in hotels this year are projected to surpass 2019 levels . As such , many investors and developers looking for new uses for office space are finding hotels an attractive alternative as demand grows , particularly due to the prime , central locations of many office buildings .
From a planning perspective , this aligns with the City of London Corporation ’ s vision for a more vibrant borough . As workers increasingly opt to stay home , particularly on Fridays , it ’ s not gone unnoticed that retail , leisure and hospitality are suffering from a lack of foot traffic . To combat this , the City of London have unveiled their vision for the Square Mile in its City Plan 2040 to breathe new life into underutilized spaces , beyond residential and traditional hotel conversions . As part of this transformation , the Square Mile is seeking to transition into a seven-daysa-week cultural and leisure destination ,
Stephen Nicholas providing encouragement for hotels who make best-use of their multipurpose functionalities , ideally encompassing fitness and wellness facilities , restaurants , bars and nightlife hubs under one roof .
Though traditionally larger hotel chains have not maximized their ground-floor experiences , instead focusing purely on bed capacity , modern hoteliers are reimagining spaces as business hubs , which appeal to many planners through adding life to the micro-locality . For example , Southwark Borough is elated with the Hoxton Southwark hotel , as it not only delivers a vibrant social ground floor , but adapts to modern business needs by delivering flexible working capabilities and private meeting rooms . This ensures that hotel developments not only serve the needs of tourists , but also of local businesses and residents .
Jeremy Randall , a partner in the Planning and Development team at Gerald Eve , recently mentioned in conversation that , “ The City of London ’ s Destination City strategy proposes a package of measures to transform the Square Mile as a world-class arts and culture venue to ensure that the City is attractive seven days of the week for workers , residents and tourists . Hotels are one cog in the wheel to this shift — not only will increased footfall require more bedrooms , but hoteliers are reimagining hotels beyond accommodation for tourists . Instead , many are developing with the purpose of becoming a creative hub , not only for fleeting visitors , but a ’ third space ’ for the residents of cities , providing a space to work , drink , eat and play .”
As a result , investors and developers who are concurrent with this vision are likely to find City planners more amenable to their proposals to convert vacant office space into hotels . While this trend of office-to-hotel conversions is underway in the Square Mile , the reimagining of the modern hotel will not be confined to the City . Starting with adjacent areas , such as Southwark , hotels as creative and cultural hubs are likely
Eric Jafari
to emerge throughout other European gateway cities as well , particularly in areas where digitization has particularly taken root such as Dublin .
THE FUTURE OF DEAL FINANCING In 2023 , private buyers , such as high-networth individuals ( HNWIs ) and family offices , appeared to be the driving force behind these conversion deals . Despite the retreat of the equity markets and reluctant bank lending , debt has been available to high-quality borrowers with high-quality assets , which has sustained activity throughout 2023 and 2024 .
With rates looking to soften , and the gap between valuations and asking prices beginning to narrow , the pipeline of officeto-hotel conversions is likely to increase , particularly as a number of consensual restructurings and loan maturities will provide a greater number of assets for investors to play with .
Ultimately , the office-to-hotel conversion trend is more than just a passing fancy ; it ’ s a strategic response to changing market dynamics , shifting work patterns and evolving urban-planning priorities . As property owners and investors adapt to these changes , those with a strong brand , innovative management and a keen eye for transforming cities into creative hubs will stand out as robust and resilient investments in an ever-changing landscape .
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