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Optimistic Forecast for EMEA Hotels Investment Market in 2010, Following Static First Half of Year


London, 28th July 2010 - The first half of 2010 has demonstrated that the EMEA hotel investment market is starting to pick up, with growth expected to accelerate even more in the second half of 2010 according to Jones Lang LaSalle Hotels. Transaction volume rose marginally to €1.6 billion at the end of H1 2010, representing a 6% year on year increase. There is strong sense that the latter part of 2010 will witness stronger investment activity, with expectations that the second half of 2010 could see transaction volumes double on H1 levels.
 
As anticipated by Jones Lang LaSalle Hotels EMEA forecast at the start of the year, the UK has been the most active market in 2010, with over €300 million of investment transacted which represents a 19% market share compared to 14% in 2009. Last year’s leader, France, is not far behind with just under €270 million invested.

Hotel operators, institutional investors and investment funds/private equity continue to display a strong appetite for investment, and together accounted for nearly 65% of all hotel investment in EMEA in H1 2010.  This indicates that sophisticated investors believe it is a good time to buy and are enjoying reduced competition for assets, as many of the high leverage buyers have fallen out of the market.

Domestic capital remains the dominant source of investment accounting for 47% of total investment, with investors still focused on familiar territory. Investment from European sources has risen significantly from 18% to 34%, while investment from the USA continues to be weak. Middle Eastern interest remained relatively strong with a growing market share during H1 2010 moving to 14% from 8% in 2009; however there has been no significant investment from Asian buyers despite strong interest from this region, in particular South Asia. These types of buyers tend to look for good quality assets in London and Paris at discounted prices, which are hard to find in today’s market as buyers outnumber sellers by a considerable margin.

Mark Wynne Smith, CEO for Europe, Middle East and Africa at Jones Lang LaSalle Hotels commented: “The dynamics of the market have changed and deals are taking longer to complete, with both buyer and seller approaching negotiations with caution.  However, we are starting to see sellers acknowledge that buyers’ pricing is acceptable given the current economic climate, which is likely to drive increased deal volume as the year progresses.”

Wynne Smith also notes the stock being marketed is of a substantial volume and that there are more deals in the pipeline than there were in H1 2009, many of which will materialise over the coming months. This will be supported by improved access to credit from lenders and increased certainty about underwriting projects.

Wynne Smith concludes: “The market conditions experienced over the first half of 2010 are reminiscent of what we saw in 2002.  The second half of 2002 saw a doubling of transaction volume and I anticipate that we will see a similar outcome over the remainder of this year”.
 
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