JLL is forecasting hotel sales in Asia Pacific will grow 15% in 2015 to reach USD$8.5 billion, with Chinese capital expected to become far more active in the hotel investment market globally.
JLL is projecting global hotel transaction volumes will reach an eight-year high of between USD$65 to USD$68 billion in 2015, representing a 15% increase over 2014 volumes.
JLL’s forecast is based on the firm’s 2015 Hotel Investment Outlook, a forward-looking, global analysis that tracks key factors affecting the hotel investment market.
The key drivers of hotel transaction activity globally in 2015 include: strong demand fundamentals, increased liquidity in the debt markets, record levels of single-asset trades, increased portfolio activity in secondary markets and a swell in off-shore capital.
In Asia Pacific JLL also anticipates a transaction volume increase of 15%, which would mean around US$8.5 billion of transactions.
“China’s policy change allows numerous investors to compete in international real estate for assets including hotels,” said JLL Hotels and Hospitality Group Chief Executive Officer – Asia, Scott Hetherington.
“We expect this heightened level of activity to become the new norm, and Chinese investors will gain scale in gateway cities.
“We believe Japan will be the stand-out market in the region, led by the depreciation of its currency, the availability of stock and operating conditions,” he said.
There is a growing interest in Japan, in particular for portfolio deals in the country, and a steady confidence in Australia.
Indonesia will be a favoured market driven in part by currency plays, and liquidity in China is set to rise as well as policy around outbound capital has been eased and focus increases on cross border investment.
“After a record year of transactional volume in Australia, foreign buyer activity for prime CBD hotels has certainly not slowed, especially with the continued and strong investment interest from China,” said JLL Hotels and Hospitality Group’s Australasian CEO, Craig Collins.
“We also expect metropolitan and regional hotels to remain a major focus of domestic, and increasingly, offshore groups. Australia’s stable government, transparency and growing tourism make it a continued safe haven for buyers.”
United States-based private equity funds and Middle East investors are expected to remain among the top exporters of outbound capital. It is the Chinese, however; who will lead the pack in terms of year-over-year increases in capital deployed.
Chinese outbound capital experienced unprecedented growth in 2014 driven by the strength of China’s growing economy and appreciating currency. Towards the end of last year China’s Ministry of Commerce relaxed policy restrictions on big-ticket foreign investments and simultaneously loosened the approval process for overseas purchases. This adjustment allows Chinese investors to more easily access key global markets such as New York, San Francisco, London, Paris and Sydney.
JLL expects Chinese outbound capital to account for USD$5 billion in 2015, a five-fold increase on 2014. This places Chinese investors among the ranks of top exporters such as the United States and the Middle East; just a few years ago China did not feature in the top 10 list.