WASHINGTON, DC—Signs are proliferating that the DC hotel market is on an upswing. There was last week's sale of the St. Regis in Washington, which we reported yesterday, and last month's purchase agreement by Hersha Hospitality Trust to buy the 155-room St. Gregory Hotel & Suites for $57 million.
As far as Marc Magazine, executive managing director of Savills Studley's Hotel Group, is concerned the upward trajectory for the DC area's hotel market had become clear before these deals. After a few quiet years of here-and-there activity, this asset class has regained momentum.
When the St. Gregory traded, a deal on which Savills Studley advised, Magazine called it a bellwether transaction.
With the St. Regis Washington trading to the Qatar-based Al Rayyan Tourism Investment Co., or ARTIC, Magazine takes this narrative a few steps further.
The Washington DC hotel market is poised to price on par with such cities New York and Chicago and Los Angeles, where activity has been strong and investor interest high, he tells GlobeSt.com, citing the aforementioned transactions as well as others in the pipeline that are expected to close with the next few months.
It may seem to be a remarkable turnaround to the casual observer given the clear excitement in New York City last year from investors -- and the equally clear disinterest that Washington DC received.
That is shifting, Magazine says, as New York's growing inventory is changing supply-demand fundamentals and as Washington DC seems to have regained some measure of stability. Sequestration is in the past and few expect there will be another government shut down.
Most of the demand in DC will be for so-called "four-star properties," he predicts. The list of the city's five-star assets is short, at least relative to New York City: there is, to name a few, the St. Regis Washington, the Mandarin Oriental, the Hay-Adams and the Four Seasons.
"We have a smaller supply of "five-stars," Magazine says. "So the four-stars is where the competition will be intense."
Or rather "is" intense. The rush for these assets is happening now, Magazine says -- and it is being reflected in cap rates. For the last 18 months Washington DC hotels' cap rates were higher than those for properties in Los Angeles, New York and Chicago by 100 basis points. That is starting to narrow, he says. "By the end of the year I would predict that they will be comparable."
Once pricing is revealed for the St Regis Washington, he adds, "I would bet that it is going to be surprisingly low."
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
