A recently-converted boutique hotel in London’s Leicester Square has been put on the market for £42m.
The former office building on 2-5 Charing Cross Road has undergone a significant conversion project and is set to be fully operational by June.
The announcement comes as former Natwest bank on London’s Piccadilly is also set to become luxury boutique hotel.
The listed property opposite the Ritz has been acquired by Royal Group for £65m, with another £45m to be invested to transform the building into a 50-suite boutique hotel.
Savills has predicted that hotel investment activity will pick up pace in 2025, “supported by growing investor interest in the asset class, improved confidence in the global economy and the widening yield gap to debt costs”.
Hotel rates in London returned to pre-Covid levels of nearly 90 per cent just last August, boosted by tourism in the city, and reached a seasonally impressive 73.1 per cent this February, according to RSM.
A wobble in the hotel market?
Occupancy has been high despite huge rises in the price of hotel rooms, which have nearly doubled in the last five years due to high interest rates, wage increases, and supply chain costs, according to Modern Hospitality.
The number of rooms available, too, has spiked – there will be 757 new luxury hotel rooms by the end of 2025 in Greater London, the biggest annual increase since 2014.
The total number of luxury hotel rooms will rise by four per cent to 19,535, according to Savills.
The success so far has relied on high demand and good margins, but there may be trouble ahead.
“We know that labour costs are starting to bite, and this pressure will step up from April when the post-Budget increase in employers’ national insurance contributions and national minimum wage hit,” Chris Tate, partner and head of hotels at RSM UK, said.
“As expected, last week’s Spring Statement gave no additional support for hotel… [but] the OBR forecast did confirm an uplift in disposable income which could help to mitigate cost increases if consumers save less and treat themselves to get away in 2025.”
Thomas Pugh, economist at RSM UK, added: “The fact that real household disposable incomes, which are the best measure of aggregate spending power, grew by almost 2 per cent in the fourth quarter and by more than 4 per cent as a whole over 2024…. puts households in a good position to start to ramp up consumer spending, if they are confident enough to switch from saving to spending.”
The freehold contract for 3-5 Charing Cross road is being sold by global real estate firms Avison Young UK and JLL at the appointment of Z Hotels.
