The German hotel investment market remains strong with a lack of
high quality assets available for sale. This trend is likely to
continue. The German hotel market currently has some interesting
characteristics, namely the significant number of unbranded hotels
(although many of these hotels are burdened with material capex
requirements), a strong German economy, a robust business travel
market as well as an increasing attractiveness of German cities
such as Berlin and Munich for international tourists.
This is resulting in an increasing number of investments being
made into office properties but with potential for subsequent
conversion into hotels. Just as there is a strong demand for hotel
space there has been a decreasing demand for office space in some
areas (particularly non-central CBS locations) as tenants are
opting for "home office" solutions, shared office space
and other ways to minimise the need for office space.
The German legal framework provides for the necessary
flexibility to convert office space into hotel properties.
Accordingly, we see an increasing appetite of international
investors in particular with conversion experience in other
jurisdictions joining other developers in exploring this
alternative method of acquiring assets for hotel use.
The key legal aspects to consider are:
Is a hotel permissible in downtown areas where most of the
conversion projects are located? In most cases, urban zoning plans
and state building law will allow for conversions. There are few
legal hurdles preventing the grant of the necessary building
The newly created hotel space must of course comply with all
regulatory requirements applicable to all hotel projects (e.g.,
safety, fire protection, etc.). The usual suite of professionals
such as architects, engineers and, if necessary, lawyers can help
to address these requirements quite easily. In this context, it is
important to understand that office conversions are counted as
completely new buildings. The developer cannot rely on the
privileged status quo under the original (office) building permit.
In other words, grandfathering regulations will not apply and the
refurbishment is subject to the up-to-date building requirements
which apply to hotels.
Negotiations of a hotel lease or hotel management agreements
for future hotel use will not materially deviate from the usual
negotiations of such agreements for hotels under development
although stipulations on timing and permit related issues might be
more detailed to cover the future tenant or operator. Brand
standard compliance may also need care and attention depending on
what structural restrictions impact the design and an
operator's preferred brand requirements. A few waivers may need
to be "mutually agreed"!
Originally published 7 October 2016
Mayer Brown is a global legal services provider
comprising legal practices that are separate entities (the
"Mayer Brown Practices"). The Mayer Brown Practices are:
Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both
limited liability partnerships established in Illinois USA; Mayer
Brown International LLP, a limited liability partnership
incorporated in England and Wales (authorized and regulated by the
Solicitors Regulation Authority and registered in England and Wales
number OC 303359); Mayer Brown, a SELAS established in France;
Mayer Brown JSM, a Hong Kong partnership and its associated
entities in Asia; and Tauil & Chequer Advogados, a Brazilian
law partnership with which Mayer Brown is associated. "Mayer
Brown" and the Mayer Brown logo are the trademarks of the
Mayer Brown Practices in their respective
This Mayer Brown article provides information and comments
on legal issues and developments of interest. The foregoing is not
a comprehensive treatment of the subject matter covered and is not
intended to provide legal advice. Readers should seek specific
legal advice before taking any action with respect to the matters
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
On 26 November 2015, amendments to the Law on Communications 2004 (the "Communications Law") were published.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).