Jones Lang LaSalle Hotels Forecasts Americas Hotel Transactions to Hold Steady at $15 Billion in 2012 (United States)
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Jones Lang LaSalle Hotels Forecasts Americas Hotel Transactions to Hold Steady at $15 Billion in 2012 (United States)
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Category: North America & West Indies / Carribean islands - United States - Industry economy
- Figures / Studies
This is a press release selected by our editorial committee and published online for free on 2012-01-19
Healthy operating fundamentals and an abundance of equity capital will support a buoyant market for hotel transactions
The pace of hotel real estate investment in the Americas reached a four-year high in 2011, as transaction volume swelled to $15.2 billion, a 24 percent increase over 2010 volume, according to Hotel Investment Outlook, a new research report from Jones Lang LaSalle Hotels.
Notwithstanding market volatility in the final months of 2011, hotel fundamentals continued to show resilience. While it is expected that the recovery will continue to be uneven, it is a recovery nonetheless. Americas hotel transaction volume in 2012 will at least match 2011 levels with an estimated $15 billion in transactions, as relatively healthy operating fundamentals and an abundance of equity capital continue to drive demand for acquisitions. The competitive landscape will shift to greater equilibrium between public and private equity capital sources, and debt markets are expected to become more liquid as the year progresses.
“Investors have been closely monitoring the state of the economy and its impact on the hotel investment market,” said Arthur Adler, Managing Director and CEO-Americas for Jones Lang LaSalle Hotels. “Despite the recent volatility, the Americas region will continue its positive momentum in 2012 and hotel operating performance is expected to improve, driven predominantly by increasing room rates.”
During 2012, considerable differences in the buyer audience will emerge as RETs pull back and private equity, institutional and off-shore sources re-emerge.
“The gates are opening for eager private equity and institutional buyers willing to take calculated risks in primary and secondary markets. REITs are likely to be less active buyers as their share prices are still well below the highs of the summer of 2011, although they may make a comeback in the second half,” Adler said. “We expect that quality hotels with positive current yield will be the best positioned assets for investment. Additionally, lenders, banks and special servicers will be more motivated to sell assets.”
In the United States, demand from offshore buyers remains active. Middle Eastern capital will selectively pursue opportunities, primarily in East Coast markets, while investors based in China and Southeast Asia will scour the West Coast for purchases. European investors are expected to remain quiet in 2012.
Adler added, “While the volume of foreign capital invested in the United States will not move the needle on a national basis, foreign investors will define the market in several gateway cities.”
Latin American investment fundamentals will be strong in 2012 as the economic growth rate in the major South American countries is expected to be double that of the United States over the next several years.
“Brazil continues to lead South America in terms of investment activity and large-scale development opportunities. Argentina, Colombia, Chile and Peru are also increasingly on the radar for domestic and intra-regional investors,” said Gregory Rumpel, Managing Director of Jones Lang LaSalle Hotels. “We expect the hotel transaction market in South America to slowly open up over the medium term, and the number of internationally branded hotels across all segments is poised to increase over the next several years.”
The positive momentum in the transactions market that was solidified in 2011 is expected to continue in 2012 despite the overhang of volatility. Operating fundamentals are expected to remain strong in 2012 and the transactions market will be bolstered by acquisitive private equity funds. Adler noted, “Flexibility will be a key theme for 2012, and the ability to react to change quickly will feature as a success indicator.”
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