Leading real estate firm Savills is tipping the US and UK to lead an international hotel investment surge in 2013. The firm predicts a significant increase in UK hotel investment on the £1.64 billion transacted last year, with estimates that volumes in the first quarter may already have hit 60% of that total.
The report suggests that a number of high profile assets due to come to market in the capital will boost overall volumes, as will a number of major transactions scheduled for completion last year that were pushed back due to complexities. These deals are now set to complete in the beginning of the year, pushing Q1 volumes to around £1 billion (approx. €1.16 billion) according to Savills.
Robert Seabrook, head of Savills UK hotel investment, comments: "2013 is set to be a very strong year for the UK hotel investment market and could exceed £2bn. The market will continue to be driven by overseas investors, especially from Asia Pacific countries and the US who accounted for 79% and 16% respectively in 2012."
The firm is predicting a similar growth over last year's total (US$11.7 billion) in the US. Manhattan led the national investment market last year with volumes totalling US$2.8 billion (approx. €2.15 billion) and notable transactions included the Plaza and Shops at the Plaza and Essex House.
According to the report this year will mark a change in the US market from being driven by occupancy as for the last few years, to seeing strong growth in room rates. The firm puts this down to an expected increase in corporate group travel as well as increasing international tourism to major attractions.
Savills presented a mixed outlook for the Asia Pacific region, with investors showing increasing interest in emerging markets including Mongolia and Cambodia, off the back of ongoing yield compression in core markets like Hong Kong, Tokyo and Singapore. However, market penetration is still difficult and the higher risk attached makes opportunities relatively limited, and driven by opportunistic returns according to the firm.
The firm expects REITs to be the more active buyers in the Asia Pacific region, as they are now more easily able to make overseas purchases, particularly Singapore REITS. It also expects investors to monitor Japan and China for the possibility of distressed developments, from CMBS servicers in the case of Japan and from developers with cash flow problems in China.
Marie Hickey, associate director in Savills UK research team, says: "Overall for the hotel investment markets of the UK, US and Asia Pacific we expect the pursuit of trophy assets to be a key driver of investment activity in 2013."
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