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The projection is based on improving economic conditions, strengthening investor confidence and an increase in stock.
“The EMEA hotel market will continue to be difficult in 2010, albeit with some improvement. Transaction activity will be characterised by two types of investors, opportunistic buyers and secure income buyers. The former will be most apparent in the markets most severely impacted during 2009, including the UK, Spain and Ireland. The latter group will mainly constitute institutional investors, searching for properties with a solid income and sound covenants,” said Mark Wynne-Smith, CEO, Jones Lang LaSalle Hotels, EMEA in a statement on Jan 21.
In 2009, hotel investment volume dipped to €2.9 billion, a drop of 63% compared to 2008. The figures reflect the lowest volume of transactions since the late 1990s.
The majority of hotel investment activity last year was recorded in Continental Europe, with France registering the highest volume, while the strongest demand was for key gateway cities such as London and Paris.
The UK, accustomed to taking the lead had to settle for second place, followed closely by Germany and Spain. However, the UK is expected to bounce back in 2010, moving back towards a 30-40% share of investment into EMEA.
Single asset transactions accounted for 72% of total volumes in 2009 and portfolio activity fell by almost 80% compared to 2008, as lending capacity reached record lows.
“This trend is not forecast to change in the near future. Portfolio activity will remain limited as deals continue to require a high level of equity. The growing importance of single asset transactions severely impacted the average deal size - 81% of hotel property transactions recorded a sale price lower than €50 million,” said Wynne-Smith.
The number of distressed hotel assets on the market is expected to slightly increase in 2010. Despite the refinancing challenges in 2009, distressed hotel sales have not been widespread.
Jones Lang LaSalle expects the investment activity in 2010 to be driven by the banks and their willingness to lend and focus will remain on smaller deals and risk adversity. Banks will also increase their focus on clearing their balance sheets and bring more distressed assets to the market.“The hotel buyer base is expected to widen a little in 2010 attracted by stabilising trading conditions and opportunistic deals. We will see strengthening interest from high net worth individuals, such as Asian investors and sovereign wealth funds. The institutional market is also experiencing an inflow of funds. Generally speaking, buyers will remain risk adverse and focus on investing in prime assets in a good location at a distressed or discounted price with a view on capital appreciation in the coming years. Investment activity will continue to be concentrated in the western European markets, where buyers feel more comfortable investing their money,” said Wynne Smith.
