Nordic-focused private equity investor Slättö recently announced plans to expand its hospitality portfolio by acquiring a run down, 1960s office building. The property purchased, a sombre concrete and green glass monolith, was occupied by the Copenhagen police for the past 30 years. Yet it is strategically situated on Halmtorvet Square, close to the city’s trendy Meatpacking District (Kødbyen), and stands just minutes from Copenhagen Central Station and the M3 metro line.
For Erik Möller, head of hotels at Slättö, the deal is a classic value-add, brown-to-green opportunity, combining architectural preservation with significant energy upgrades. “This transaction is a continuation of one of our thematic strategies in the hospitality sector - converting underutilised buildings in prime urban locations into modern, high-performing hotels,” he says. “Transforming this landmark building will contribute lasting value to the district and the city as a whole.”
Designed by architect Frederik Bojesen, the three-winged complex, set over 10 stories, will become a 169-room apart-hotel leased long-term to operator Bob W. Niko Karstikko, Bob W’s CEO and co-founder, describes Copenhagen as “the leading Nordic travel destination”, with the signing strengthening its presence in the Danish capital. Indeed, Colliers’ data suggests that Copenhagen is the strongest-performing hotel market in the Nordics, driven by international travel, diversified demand, and limited new supply in the coming years. Overnight stays have surpassed 2019 levels for three consecutive years, and revenue per room has remained resilient despite an increase in availability.
Offices in peril
Slättö isn’t the only hotel investor monitoring the European landscape for obsolete offices. Institutional investor PGIM Real Estate recently snapped up a Berlin office property from PIMCO, with plans to convert it into micro-living units, targeting students and young professionals under its Omniliv brand.
Recent research from real estate and asset manager AEW suggests that the volumes of secondary offices being acquired for new uses will boost real estate’s capital markets more widely. Says Hans Vrensen, head of research & strategy Europe at AEW: “Around 30 percent of office transactions in early 2025 involved conversions to other uses, a trend accelerated post-Covid that will help reduce vacancies and increase rents.” As megatrends including AI alter the requirements of office tenants, hotel investors are often first in line for taking over the less appealing blocks, with atriums becoming dramatic lobbies, and generous floorplates aligning with a transformation into rooms and suites.
Adds Joshua O'Rourke, associate director, Savills hotel capital markets: “Grade B office stock is struggling from an occupational perspective in certain locations. In the UK, commercial properties that fail to meet sufficient energy performance standards by 2028 and more so by 2030, will no longer be lettable.” This ticking timebomb means more and more office stock will be prime for repositioning, particularly where the projected capex spend to convert to a Grade A office is no longer accretive, he notes.
Public authority role
One critical factor in executing conversions is public authority consensus, and O’Rourke sees a virtuous example in the planning department of the City of London. “In the last 24-36 months, they have taken a more ‘entrepreneurial’ view of the conversion story, which aligns with its new ‘Destination City Programme’.” He adds: “Boroughs including the City and Camden used to require an extended period of ‘failed office marketing evidence’ to prove that the office space is no longer fit for purpose, however these timelines are softening.” However, he notes that potential conversions in other prime central London locations remain a challenge, with many boroughs still championing office use in the first instance.
Yet Savills research shows that in 2024, over 330,000 square feet of office space across ten buildings in the City of London were acquired with the intention of being converted for hotel use. Current projects in the works include Atlas House in EC2, a seven-storey Georgian property, which was sold by Hines in 2023 for £34.55 million, reflecting a valuation of £532 per square foot (GIA).
Integrity International won the deal for Atlas House in the face of stiff competition, and recently unveiled how the hotel might look under Integrity’s Blue Orchid hotel brand. Offering 104 rooms, the hotel will include a restaurant, cocktail bar and health club, spa, pool and gym. It will also incorporate flexible workspaces open to the public.
Elsewhere in London, Integrity is working on the conversion of more Georgian offices to hotel accommodation in the Tower Hill neighbourhood.
Even when conversions get the go-ahead, they are not always straightforward. Yet O’Rourke says that developers and owner operators are getting creative when faced with the complexities of architectural aspects such as “deep floor plates”, with some London brands like Zedwell and Point A effectively marketing windowless rooms to guests, thanks to a few smart design tweaks. These properties also tend to reach the market at more attractive prices due to the difficulties surrounding existing use value.
Hotels in demand
Hotel conversions have become an even more pressing topic as European hospitality investment volumes continue to ramp up, with competition for standing assets higher than ever. Core capital is increasingly joining private equity and family offices in favouring hotel investments, but new supply has failed to keep pace in most major markets.
In the first quarter of this year, European hotel transaction volumes reached €5.5 billion, similar to the same period last year, but still some 24 percent above the 2020–2024 five-year average. Market watchers already predict that year end deal volumes will top 2024, reaching about €25 billion in total, compared to last year’s €21.9 billion.
Construction data suggests that the supply picture is slowly improving, with Q1 data for 2025 recording 90 new hotel projects breaking ground across Europe, a 14 percent increase in projects year-on-year, according to the Europe Hotel Construction Pipeline Trend Report from Lodging Econometrics (LE). New project announcements for the same period total 94 projects, equating to 13,576 rooms.
But hotel conversions from other brands or other asset classes arguably still beat ground-up development when it comes to budgets and timelines. O’Rourke cites the ongoing high cost of building materials, contractor shortages and the relatively high cost of debt, as well as the overall risk profile of new builds. On top of that, “the prolonged development period for a ground-up development, compared to a conversion, creates a drag on IRR, with unforeseen development delays further challenging a project’s return profile”, he adds. “Relative to the ten-year period preceding 2021, and despite forward looking curves, we remain in a high-interest rate environment, particularly for development financing, which continues to reduce the viability of schemes.” He concludes: “Add to that the density of Europe’s historic cities, and conversions will continue to play a significant role in the delivery of future hotel supply.”