WORLDWIDE Jones Lang LaSalle Hotels estimates that US$24.3 billion in hotel real estate traded hands globally in 2010, and that figure is set to grow considerably this year.
The Americas region registered the most dramatic rise in 2010, with transaction volumes increasing five-fold to US$11.1 billion, driven by acquisitive REITs and the US$3.9 billion purchase of Extended Stay Hotels. Europe, Middle East and Africa was the second most liquid region, experiencing a more than 110% jump in volumes to US$9.3 billion. Activity across Asia Pacific edged upwards at a more moderate pace, with total sales of US$3.9 billion, reflecting lower levels of leverage in the market and hence fewer distressed sales, along with a slowdown in deal pace in Japan.
“The rebound of operating fundamentals is a motivating tonic for both buyers and sellers, as is the broad cross-section of equity capital in the market,” says Arthur de Haast, global CEO for Jones Lang LaSalle Hotels. “We expect volumes to ratchet up another 15 to 25% in 2011, reaching US$28 billion to US$30 billion globally.”
Hotel real estate sales in the Americas are expected to total up to US$13 billion in 2011, driven by the breadth of equity, an increased number of bank-forced sales and easing levels of leverage, with the bulk of activity taking place in the United States. This will represent an increase of 80% on 2010 levels, when excluding the US$3.9 billion Extended Stay Hotels transaction.
“Investor confidence is on a robust rebound,” says Arthur Adler, CEO and managing director of Jones Lang LaSalle Hotels. “Markets are expected to continue to recover through 2011 as the economic upturn solidifies. Dominant acquirers of hotel assets in 2011 will be REITs, institutional investors, and private and high-net-worth investors with opportunistic capital.”
In other parts of the world, the EMEA region is projected to increase to US$13.1 billion, with bank-driven sales driving a significant portion of this figure, particularly in the United Kingdom, Ireland and Spain. Japan is forecast to lead the Asia Pacific sales, slated to reach US$3.5 billion in 2011 as banks take a view on initiating structured sales.
As the economic rhetoric switched from recession to recovery, cross-regional capital flows increased to 41% of total transaction volume in 2010, compared to 15% in 2009, as well-capitalized investors acquired assets in displaced markets across the globe. Global capital was most active with a share of 53% of cross-regional investments. Asian, Middle Eastern and U.S. investors were keen to secure prime acquisition opportunities outside of their region, particularly in Europe.
“There is no doubt that cross-border investments will further increase in 2011,” de Haast says. “With more clarity on operating fundamentals, continued breadth of equity capital in the market, and generally reduced risk perceptions, investors will be more open to opportunities beyond their home markets.
“Fortune favors the bold. Early movers and risk-takers will often be rewarded, and the global mantra across all markets and segments in 2011 will be the focus on hotel fundamentals.”