2017 will see record levels of stock expansion for the extended stay market according to new research from Savills.
The new study highlighted that over 2,600 units will be delivered over the year, marking a 13.8% increase on 2016 stock levels.
The increase will predominantly be driven by regional markets, which look set to experience 20.5% stock expansion, compared to just 8.1% for London.
Of the new stock, 82% will arise in the major regional cities, with Manchester leading the charge with expansion levels of 73%.
The new results further confirm the trend seen over the last three years that reflects operators growing appetite to develop their own branded portfolios, with the top 10 operators accounting for 54% of the 3,800 units expected to be delivered by the end of 2019.
Staycity looks set to improve its lead as the largest operator in the UK with 680 units in the pipeline, increasing current stock levels by 57.9% by the end of 2019.
Marie Hickey, commercial research director at Savills, comments: “Regional markets are set to have a record breaking 2017 in terms of extended stay stock expansion, including serviced apartments and apart-hotels. This could create some short-term operational performance issues due to supply absorption, however the dominance of apart-hotels in the development pipeline and their ability to tap into the leisure segment should help minimise any potential adverse operational impacts as we forecast RevPAR growth at the end of 2017 to remain in positive territory. ”
Richard Dawes, associate director in Savills hotels team, adds: “Investment in the extended stay market is battling a lack of purpose built stock, against a backdrop of improving investor interest due to its similarities to the traditional hotel market and it’s potential crossover with the private rented sector. As a result we are starting to see an uptick in forward funding activity as a way for institutional capital to access this exciting sector.”