Investors bullish on Asian hotels
With strong economic growth across Asia and tourism numbers rising steadily, investors are enthusiastically buying into hotels in the region. Jones Lang LaSalle recently conducted a survey on hotel investment, targeting 2,000 of the world’s biggest tourism property investors and owners. Responses indicated a significant rise in those interested in buying into Asian hotels.
David Gibson, chief executive of Jones Lang LaSalle’s Asia Pacific Hotels division, said: “Trading sentiment in Asia Pacific remains overwhelmingly positive and reflects confidence in the sector, both now and into the future. The limited amount of hotel stock available for purchase means competition is strong and purchasers have met the low-yield expectations of vendors.”
Investor expectations for leveraged internal rate of returns for new acquisitions across the region have gone up to 18.8%, a level not seen since June 2002.
The highest level of buyer interest was seen in Tokyo last year, with 68.2% of investors seeking opportunities there. Hong Kong, Osaka and Tokyo continue to trade on a strong note and a high level of market transparency. Investment yield expectations for these markets are typically lower, with initial yield requirements in the 8-9% range.
Gibson said: “Increased competition for assets in Tokyo is expected to continue, most notably between Japanese and US investment funds. We expect development activity will be largely limited to mixed-use developments, with hot spots in India [Bangalore, Mumbai and New_Delhi] and China Beijing, Shanghai and_Macau.”
Construction costs remain high, posing a challenge to developers. The number of investors looking to sell has increased, suggesting that some feel values are nearing cyclical peaks in some markets.