NEW YORK CITY-Fifty-two percent of American investors surveyed have clear intentions to buy in the hospitality sector over the next six months, while the percentage of investors who plan to maintain their existing portfolios at present levels has declined by 13%. This provides a clear indication that transaction volume will pick up in the first half of 2011, at least in the Americas, says Jones Lang LaSalle Hotels in a report on its biannual Hotel Investor Sentiment Survey.
“After protracted dislocation and losses, transaction activity in the hotel real estate sector is regaining vigor,” says Arthur Adler, New York City-based managing director and Americas CEO for JLLH, in a release. “Now that operating fundamentals have clearly turned the corner, buyers are becoming increasingly aggressive as they seek to establish a foothold at historically low purchase prices.”
Gregory Rumpel, Miami-based EVP with JLLH, tells GlobeSt.com that the numbers on investors’ sentiment are borne out by recent activity. “The third quarter’s been very good for us in terms of transaction volume, certainly in the US,” he says. “The sentiment is a leading indicator, but it’s very quickly being followed up by real-time transactions.”
In a recent commentary for GlobeSt.com, Daniel Lesser, leader of the hospitality and gaming group for CB Richard Ellis, offered some additional color. “Despite a tepid recovery in the broader economy, investors perceive that current positive RevPAR growth, along with the ongoing strengthening in average rates, which when coupled with relatively low supply growth, will sustain the industry’s cyclical rebound,” Lesser wrote. He added that although overleveraging at the market’s peak piled a significant weight on legacy investments, “many assets are still enormously valuable. This fact is not lost on sophisticated lodging investors who are eager to capitalize on the mistakes of others.”
Rumpel notes that the “buy” sentiment among American investors is at a five-year high. Further, the survey notes that their intention to “hold” is at a three-year low.
However, Rumpel points out that on a global basis, the story is somewhat different. “If you look at this survey, it was interesting that the buy sentiment actually declined a little bit” when other regions are factored in, he says.
In the euro zone and across the rest of the EMEA region, the current environment has some parallels to what US investors encountered two years ago, and it’s likely to color their sentiments through the next survey period six months from now. “As with the Lehman collapse and all of those in-your-face situations, there are some real issues facing that market,” Rumpel says. “That’s going to make people in EMEA a little more reluctant. They want to see a quarter or two unveiling of the future before they move their sentiment up in the ‘buy’ category. It’s going to be more strongly on the ‘hold’ side.”
In the Asia-Pacific region, Rumpel says, there’s been a great run, dominated by India and China; we just haven’t seen things slow up much." As a result, any increase in “buy” sentiment among Asia Pacific investors is “a little tempered because they haven’t seen the same oscillation that we’ve had.”
Closer to home, Rumpel says, “I’m confident that we’re going to see a truly entrenched recovery that people can underwrite to. The ‘buy’ sentiment will jump in the Americas” when the next survey is conducted.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
