Hotel investment in Asia rose 218 per cent to US$7.5 billion (Bt243 billion) last year, defying all industry expectations, according to Jones Lang LaSalle.
This makes 2013 the market’s strongest year since the global financial crisis that started in 2007, when transactions were $10.3 billion. JLL forecasts this year to be a similar standout, although transactions are likely to fall because of limited supply, despite strong demand.
Singapore, Japan and mainland China led the region’s growth, with Japan up 480 per cent to $2.7 billion, as hotel trading improved in line with the expansion of the domestic economy and renewed growth in corporate and leisure travel.
Singapore’s hotel market reached new records in capital values, with transactions of $2.0 billion, more than 10 times the previous year, predominantly supported by the sale of Grand Park Orchard hotel and Knightsbridge retail, the city’s largest single asset transaction to date.
Mainland China accounted for 13 per cent of investment activity, or $1.1 billion, as recent government announcements to improve access to financing drove investor sentiment over the second half of the year.
Other markets that experienced strong growth in the region as a result of improved connectivity and burgeoning outbound travel from mainland China include Hong Kong, up 19 per cent to $486.7 million, Thailand, up 31 per cent to $337.0 million, and Maldives, up a huge 614 per cent to $267.6 million.
Mike Batchelor, managing director of investment sales for hotels, said yesterday that strong investor sentiment and the availability of quality properties were key reasons behind Asia’s impressive sales, which were hindered only by the availability of additional stock, as many owners increasingly held off selling assets in anticipation of further market growth.
Mature hotel markets such as Singapore continue to be governed by well-capitalised, inter-generational investors and as stock becomes increasingly limited, investors are now starting to look further afield once again at new and emerging markets in the region in search for greater yield and capital growth opportunities.“There remains no shortage of capital to be invested in the sector in 2014 (mostly from interregional Asian investors). However, improved trading and the tightening of cap rates have elevated the expectations of the region’s sellers,” Batchelor said.
“The resulting restricted supply will shape activity this year and, while overall deal flow will remain robust, we expect volumes to moderate in 2014 because of fewer landmark transactions and portfolio deals in the key gateway locations.”
Frank Sorgiovanni, vice president of research and strategic advisory, said the markets that will receive most investor attention throughout the year – Japan, Indochina and the Indian Ocean – might account for most of the transactions.