NEW YORK CITY-2011 marked a record year for hotel deal volume in the New York City market, but don’t expect the same in 2012. According to data from Jones Lang LaSalle Hotels, last year saw $3.5 billion in transaction volume here, and in the coming year the firm anticipates a "strong year," with figures hitting between $2.2 and $2.6 billion according to Amelia Lim, executive vice president for Jones Lang LaSalle Hotels and leader of the firm’s Northeastern US advisory practice.
"The lodging market fundamentals--occupancy, ADR and the profitability of hotels--are clearly on an upward trajectory," Lim explains. "That being the case and with the US dollar having shown resilience especially as demonstrated during the first couple of weeks of the year, investors, particularly foreign investors, will continue to seek a safe haven. Various cities in the US represent 'safe haven' investment locations as it relates to lodging real estate--New York is one of them."
And this designation will certainly be an asset to the market. In a recent statement highlighting data from its Hotel Intelligence New York report, JLL Hotels determines that the New York market will remain the most active, in terms of transactions, across the US. Further, the city will lure REITs when the markets become more liquid, the report states, as over 50% of acquisition volume in this city was prompted by these investors last year.
But with investors at the ready, why won’t New York hit record levels of transaction volume again?
"A lot of the very large assets traded at a clip in 2011 that we haven’t seen for the past 3 to 4 years," says Lim. "We’ve seen so many large assets trade." With these gone, the same numbers just can’t be reached. However, Lim feels that transactions will take place. She says REIT share prices are "just about" leveling out, which will allow them to begin to make acquisitions as 2012 progresses.
With this in mind, it seems that strong, steady growth is the theme for New York hotels in 2012. Alas, there won’t be any of last year’s fireworks. This being the case, JLL Hotels expects room supply to increase by 3.4% with 17 new hotels and 2,700 new rooms predicted to deliver in 2012; figures that aren’t too shabby. But Lim points out that all markets--New York included--are still playing catch up with RevPAR figures.
"If you look at it on a room revenue basis of how far we are from the peak that was achieved in 2008, we’re still probably about 15% below that peak," Lim explains. "In terms of closing the gap, there’s still a ways to go. There is opportunity and people are aware of that--there’s just a fundamental gap, and it can be closed. It will be closed."
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