According to Savills report Q3/2016 registered US$2.26 billion worth of investment transactions, representing a 15.0% increase over Q3/2015 (US$1.96 billion). The number of transactions was also significantly lower. Forty transactions were closed this quarter, while 46 transactions were recorded over the same quarter the previous year. The average transaction price was US$56.4 million, which was significantly higher than the US$42.6 million in Q3 year ago. Japan commanded the largest share of total sales volume in the region this quarter, and all 13 transacted assets were acquired by Japanese investors.
Japan continued to be one of the most active markets in APAC. Japan’s explosive growth in inbound tourism and its chronic lack of room supply have created a real interest in the hotel market, and players are leaping to take advantage.
The largest buyer of the quarter was Japan Hotel REIT Investment Corporation (JHR) with the purchase of three hotels – Hotel Vista Grande Osaka, Hilton Nagoya and Hotel Ascent Fukuoka. The total sale was worth approximately JPY47.1 billion. Hotel Vista Grand Osaka will be rebranded into Holiday Inn Osaka Namba by 2016.
Hotel Vista Grande Osaka was the largest transaction in Japan, sold by GK Apollo for JPY27.0 billion (US$267.3 million), or JPY85.9 million (US$851,275) per key. This was followed by Hilton Nagoya which was acquired at JPY15.2 billion (US$150.9 million), or JPY33.1 million (US$328,207) per key.
In June, Japan’s Land, Infrastructure, Transport and Tourism Ministry announced a plan to relax the oor area ratio of buildings by 1.5 times, or up to an additional 300 per cent for hotel constructions. The new standards are expected to substantially increase accommodation capacity following Japan`s continuous increase in foreign visitors and the upcoming 2020 Tokyo Olympics. Although based on this relaxed regulation, each local government is required to decide on their regional or area ratios under the City Planning Law, and therefore the price of the land for hotel usage in major cities is expected to increase.
In China, sellers’ expectations remained high, and the continued lack of debt nancing for hotel projects has led major Chinese hotel investors to continue to look overseas for either tourism-related investments or refocus into investing in commercial assets or companies in other industries with high growth potential.
Chinese investors’ interest in Australian assets was evident in this quarter, concluding ve transactions there with a total of A$474.7 million (US$352.8 million), representing 15.6% of total volume in the quarter.
There were only two transactions in Southeast Asia this quarter. The Renaissance Kuala Lumpur Hotel changed hands between IGB and S. Alam Group for MYR765 million (US$187.4 million), or MYR840,659 (US$205,890) per key. There was no transaction in the same period the previous year. According to Tourism Malaysia, international visitor numbers for 1H/2016 grew 3.7%, with remarkable increases from China and Thailand at 32.1% each and Laos at 26.8%.
The Singapore hotel investment market remained inactive this quarter, due mainly to the lack of suitably priced assets and the tightened control of room stock by the Urban Redevelopment Authority.
There were 17 transactions in Australia, totalling approximately A$943.2 million (US$716.4 million) this quarter, compared to 16 in the same period last year. In terms of volume, however, there was a remarkable increase from A$381.2 million (US$282.3 million) recorded in Q3/2015 compared to this quarter.
Savills Report stated that Asian hotel property markets have been relatively resilient to the global economic uncertainties, given the strong domestic demand and wider policy options. Timing is key for investors at the moment, and they will continue to cautiously search for opportunities, particularly in prime locations.
Major locations such as Tokyo, Hong Kong, Singapore and Sydney remain the focus of major hotel investors in the region; however, resort destinations such as Phuket, Koh Samui, Danang, Bali and Cebu will be on investors’ radars for the next few months, as they offer greater returns.