Hotel Sales in Asia Pacific Forecast to Grow 15% in 2015

JLL’s hospitality experts have forecast that global hotel transaction volumes will reach an eight-year high of between US$65 to US$68 billion in 2015, representing a 15% increase over 2014 volumes.

JLL’s forecast is based on the firm’s 2015 Hotel Investment Outlook, a forward-looking, global analysis that tracks key factors affecting the hotel investment market.

The key drivers of hotel transaction activity globally in 2015 include: strong demand fundamentals, increased liquidity in the debt markets, record levels of single-asset trades, increased portfolio activity in secondary markets and a swell in off-shore capital.

In Asia Pacific JLL also anticipates a transaction volume increase of 15%, which would mean around US$8.5 billion of transactions. There is a growing interest in Japan, in particular for portfolio deals in the country, and a steady confidence in Australia. Indonesia will be a favoured market driven in part by currency plays, and liquidity in China is set to rise as well as policy around outbound capital has been eased and focus increases on cross border investment.

2015: China’s Overseas Ambition

United States-based private equity funds and Middle East investors are expected to remain among the top exporters of outbound capital. It is the Chinese, however; who will lead the pack in terms of year-on-year increases in capital deployed.

Chinese outbound capital experienced unprecedented growth in 2014 driven by the strength of China’s growing economy and appreciating currency. Towards the end of last year China’s Ministry of Commerce relaxed policy restrictions on big-ticket foreign investments and simultaneously loosened the approval process for overseas purchases. This adjustment allows Chinese investors to more easily access key global markets such as New York, San Francisco, London, Paris and Sydney.

JLL says it expects Chinese outbound capital to account for US$5 billion in 2015, a five-fold increase on 2014. This places Chinese investors among the ranks of top exporters such as the United States and the Middle East; just a few years ago China did not feature in the top-ten list.

“China’s policy change allows numerous investors to compete in international real estate for assets including hotels. We expect this heightened level of activity to become the new norm, and Chinese investors will gain scale in gateway cities,” said Scott Hetherington, Chief Executive Officer Asia, JLL Hotels and Hospitality Group. “We believe Japan will be the stand-out market in the region, led by the depreciation of its currency, the availability of stock and operating conditions.”

Craig Collins, CEO, JLL Hotels & Hospitality Group, Australasia, added, “After a record year of transactional volume in Australia, foreign buyer activity for prime CBD hotels has certainly not slowed, especially with the continued and strong investment interest from China. We also expect metropolitan and regional hotels to remain a major focus of domestic, and increasingly, offshore groups. Australia’s stable government, transparency and growing tourism make it a continued safe haven for buyers.”

EMEA and Americas

Americas: Transaction volumes in the Americas region will lead the way this year and could reach US$34.5 billion. Private equity funds are ready to deploy capital and top targets include select service portfolios, resorts and secondary markets. Canada’s hotel market continues its robust performance while Mexico’s liquidity continues to rise due to the traction gained by new REIT-like investment vehicles formed in 2012. Investors are cautiously approaching Brazil’s market, but the northern region of South America has become an investor hot-spot, with Colombia at the helm. In the United States, debt remains readily available and hotel CMBS issuance is back to more than 60% of its previous peak.

EMEA: Activity in Europe, the Middle East and Africa (EMEA) is expected to reach US$24.7 billion. Investment sales activity will be driven by single-asset transactions, led by London and Paris, while portfolio deals are anticipated in the U.K., Germany and Spain. Private equity shops will increasingly look to acquire assets in Southern and emerging European markets in pursuit of higher yields. Middle Eastern outbound capital will remain strong, targeting trophy assets in primary markets. JLL anticipates an uptick in securitized lending as well.