Hotel investors are on the hunt for property deals
Property investors are showing heightened interest in hotel deals as industry players adapt to higher-for-longer interest rates.
Four out of five investors surveyed by Jones Lang LaSalle Inc. say they plan to be net buyers of hotels over the next 12 months. That’s the highest rate since the commercial real estate firm started polling investors in 2000.
The company sees interest concentrated at either end of the price spectrum, with buyers targeting luxury assets and cheaper hotels and urban properties making a comeback.
“Hospitality offers a superior hedge against inflation because we reset rates every night,” said Kevin Davis, who leads the Americas hotel business for JLL. “You compare that to office or retail, where you’re looking at leases that run anywhere from five to 20 years in term.”
Investors have announced new hospitality funds in recent months. JMA Ventures and Mohari Hospitality, founded by former PokerStars CEO Mark Scheinberg, launched a joint venture to buy and develop $2 billion worth of hotels. The investment firm Certares closed its first real estate hospitality fund this year.
Even so, higher borrowing costs will likely limit transaction volumes. A seller that would normally seek to offload a portfolio of 100 select-service hotels might prefer to sell properties in ones and twos, Davis said.