Asia Pacific hotel transactions total $3.7 billion in 1H 2021
Across the region 61 hotel sales have been recorded since January 2021 while investment volumes decline by 3.7% year-on-year
Asia Pacific hotel investment remained flat in the first half of 2021 with USD3.7 billion in sales, a decline of 3.7% year-on-year. In total, 61 hotel investment deals were transacted in the first half of the year across nine countries and representing over 10,000 rooms.
According to investment data tracked and analyzed by JLL (NYSE: JLL), hotel transaction volumes in the first half of 2021 stand approximately 18% below the same period in 2019, which was the peak of the investment market in Asia Pacific. However, the completion of several major transactions continues to demonstrate the resilience of the sector and growing confidence of investors in the hospitality market despite the current challenging operating environment and travel restrictions.
“Confidence in the Asia Pacific hospitality sector’s recovery remains high and investor sentiment continues to view the industry through a longer-term lens. Volumes have held up well within the backdrop of government lockdowns and travel curbs, with the hotel sector’s resilience remaining an evergreen theme throughout the pandemic,” says Mike Batchelor, CEO, Asia Pacific, JLL Hotels & Hospitality Group.
Investment in the Asia region totaled USD3.53 billion, accounting for approximately 94% of the overall volume. China, Japan and South Korea represented the three most active markets in the Asia Pacific, collectively accounting for 86% of sales.
China led regional deal volume at USD 1.3 billion of transactions, up 54% year-on-year, with conversions of serviced apartments for strata sale and sale of older hotels for conversion to alternative use a key theme. Traditionally the region’s most active market, Japan had a slower start to the year with volumes down 47% to USD 1.1 billion however major sales by Japanese corporates that are underway or planned for the second half of the year will boost transaction volumes.
Activity in Australia also rebounded strongly in the first half of 2021 driven by the closing of AccorInvest Portfolio for circa USD134 million, advised by JLL. Overall volume of USD215 million in deals closed represented a 312% year-on-year increase in investments with scalable and core opportunities continuing to attract strong investor interest and in turn holding up pricing.
Additionally, a two-tier market is at play across the region and, other than a handful of gateway markets where buyer demand is holding up pricing, due to the ongoing impact of the Covid-19 pandemic on global travel and hospitality, investors continue to adjust their risk expectations across most markets and are largely targeting opportunistic value-add plays, according to JLL.
“In our interactions, it is clear there remains a gap in pricing across most of the key markets. However, for the most part, the region’s hotel owners are not under any stress owing to relatively low gearing, strong lender relationships and, depending on jurisdiction, broader government support,” says Nihat Ercan, Senior Managing Director, Head of Investment Sales, Asia Pacific, JLL Hotels & Hospitality Group.
Longer-term confidence in the sector remains high as buyers remain on the hunt for opportunities across the region. Record amounts of capital are being raised for investment into the real estate sector. with an assortment of buyers from private equity players to high net worth investors and corporates are vying for positions on sales. According to JLL analysis, Australia and Japan top the list for offshore capital, while domestic investor demand is driving activity in China and South Korea.
Additionally, leisure markets are seeing a resurgence of investor interest on the back of expectations for expedited recovery in view of the pent-up leisure demand. Maldives, Phuket, Koh Samui and Bali are all set to see sales concluding during the second half of the year with Maldives expected to be the region’s most active leisure investment market in 2021.
While investors remain wary of some of the shorter-term challenges facing the Asia Pacific hotel industry, highlighted by delays in vaccine rollouts and the impact of new strains and outbreaks, JLL’s full year outlook points to increased investment activity in the second half.
“We anticipate a sharper business cycle rebound, which will drive hotel investment momentum across the Asia Pacific region. The strong finish to the second half of the year will likely be driven by a pipeline of major sales that have exchanged and which are due for completion in Australia, Thailand, Japan and China. With this backdrop, our full year forecast for the region remains in line with our forecast of USD 7 billion at the start of 2021, representing an approximately 20% increase in year-on-year transaction volume,” says Ercan.
Chakkrit Chakrabandhu Na Ayudhya, Executive Vice President of Investment Sales - Asia, at JLL’s Hotels and Hospitality Group, says “Thailand’s hotel markets, particularly Bangkok, Phuket and Koh Samui, have continued to receive a high level of enquiries from regional investors with two transactions completed in the first half of 2021 and at least five transactions scheduled to complete in the second half of the year, according to our records.”
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.6 billion in 2020, operations in over 80 countries and a global workforce of more than 91,000 as of March 31, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.