■  The serviced apartment sector, or extended stay, is emerging from its relatively 'grey' market origins in the UK into a branded sub-sector of the wider hotel market.

■  This is being aided in part by the expansion of purpose built stock by operators and by private equity investment houses. The most notable example of this is the £300m allocation by Oaktree Capital to the sector through what is now known as the SACO group.

■  The most telling sign that some level of confidence in the sector is gathering pace is the acquisition of a number of properties by UK Institutions.

■  Last year Savills Investment Management acquired a serviced apartment block in Manchester leased to SACO for c.£9.5m reflecting a yield in the region of 6.6%. The same year LaSalle Investment Management purchased a similar block in Deptford leased to Staycity for approximately £9.6m.

■  Naturally the yields attached to these transactions reflect a relatively higher risk profile compared to similar hotels due to the covenant attached to operators in this space.

■  Having said this, institutional investors are becoming increasingly comfortable with the underlying operational fundamentals of the sector. For example, in London serviced apartment operational performance has tracked, and in some cases even outperformed, that for hotels. Add to this the potential for greater operational returns due to the lower service levels associated with the sector, and the sector is proving increasingly attractive.

■  The willingness of operators to take leases in order to secure sites in key markets is also aiding interest. The diversification potential away from branded budget hotels, which have tended to dominate institutional holdings, should also help boost increased transaction activity.

■  Expansion of the sector, as seen in the early days of the budget hotel sector, will continue to be driven by owner-occupiers. However, as branded stock expansion picks up pace and the sector becomes more entrenched with consumers there will be increasing opportunities for investors to enter the sector.