Hotel deal volume probably will rise to $32 billion globally this year as sovereign-wealth investors, mutual funds and insurance companies provide the most debt for transactions since 2007, Jones Lang LaSalle Hotels said.
Alternative lenders will provide senior and mezzanine debt following cutbacks by large banks, helping to increase lodging deals by an expected 6.7 percent, the real estate services firm said in its annual “Hotel Investment Outlook” report.
“When a hotel asset is trying to secure debt, there’ll be five-plus offers from lenders, as compared to one or two a year ago,” Mark Wynne-Smith, Jones Lang LaSalle Hotels’ London-based chief executive officer, said in a telephone interview. “There’s a lot of competition again.”
Private-equity firms and real estate investment trusts will continue to be the most active hotel buyers, especially in the U.S., where about 50 percent of transactions are expected to take place this year, Wynne-Smith said. Europe will be the second most active region, followed by Asia, he said.
Transaction volume, which is forecast to be 74 percent less than 2007’s record $122.3 billion, remains damped by hotel owners’ reluctance to put a large number of properties up for sale and “risk reversing the price recovery,” Wynne-Smith said. He said deals probably will climb to about $50 billion by 2016, “a more realistic level” for a healthy market.
“I think 2007 was a one-time fluke,” Wynne-Smith said. “Looking back to before the peak, transaction volumes of $50 to $70 billion in very good years were much more realistic. I believe that’s our future.”
Jones Lang LaSalle Hotels is a unit of Chicago-based Jones Lang LaSalle Inc., the second-largest publicly traded commercial property broker, after Los Angeles-based CBRE Group Inc.