The latest Hotel Investor Sentiment Survey by Jones Lang LaSalle Hotels’ reveals that 40% of respondents stated that their investment activity over the next 6 months will be to ‘buy’ assets, with positive buy intentions focused on Germany’s major cities and other key European markets including London, Warsaw, Vienna, Amsterdam and Paris.Jon Hubbard, CEO Northern Europe Jones Lang LaSalle Hotels said: “Survey results indicate that confidence in hotel real estate is holding up well despite the economic problems in Europe. Cap rate requirements remain firm at an average of 7.2 per cent, with keener yields for key gateway markets such as Paris, London and in key German cities where aggressive bidding has driven prices to peak levels. Internal rate of Return requirements also shifted more significantly, contracting by 170 basis points to 13.7 per cent reflecting continued strong investor interest in hotel real estate in Europe.”
When it comes to the most sought after asset type in Europe, Middle East and Africa (EMEA) results show that 28.8 per cent of respondents indicated their interest in targeting upscale properties for investments, with the sentiment in this asset class rising significantly since the last Hotel Investment survey in May 2012. By contrast, the weakest sentiment was recorded for lower asset classes in particular the budget and serviced apartment sector according to results. However, it is worth noting that the budget market in CEE showed some investor interest reflecting the attractive development opportunities in this emerging market.
Jon Hubbard continues: “With the flight to quality likely to continue investors expect a further hardening in yield requirements for core markets including Warsaw, Stockholm, Munich and Istanbul. Unsurprisingly, Western Europe was the region with the lowest capitalisation rate expectations with Paris registering 6.1 per cent and London 6.3 per cent.”
Meanwhile, survey results have also shown that investors remain optimistic about trading expectations in the short to medium term but are more cautious now about the medium term when compared to the previous Hotel Investor survey. Of the 37 cities tracked, 19 (51%) are expected to show trading performance growth in the short term (6 months). For the medium term, 24 cities (64%) are expected to show growth compared to 31 (84%) six months ago.
Christoph Härle, CEO Continental Europe Jones Lang LaSalle Hotels said, “While investors generally remain optimistic about trading expectations, results show a weakening sentiment for short term trading in southern Europe reflecting the difficulties that those markets currently face in the corporate and leisure arenas. For example, revenue per available room has started to decline in certain markets such as Madrid, Lisbon and Milan. However, looking at the positives, investors were particularly confident that Scandinavia will continue to improve in the short term having shown impressive resilience in the current challenging climate as well as growth as a leisure destination. The most positive outlook in terms of trading performance was recorded by Munich – the best performing German hotel market and certainly one to watch.”
