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The New South Wales accommodation hotel investment market has had the biggest year on record in 2012. Over $772 million of transactions have occurred year-to-date, surpassing the previous peak of $753 million in 2007.
Mr Craig Collins, CEO – Australasia, Jones Lang LaSalle Hotels said, “This level of activity was boosted by two national record breaking deals being the Shangri-La Hotel Sydney and the Marriott Portfolio which included the Sydney Harbour Marriott.” In June, Colonial First State’s Marriott Portfolio which consisted of a total of 1,016 rooms across three five star CBD hotels in Sydney, Melbourne and Brisbane, sold to Bursa Malaysia listed Starhill REIT. This represented the largest hotel transaction by total value to ever occur in Australia at $415 million, and the Sydney Harbour Marriott was the largest asset in the portfolio with 563 guest rooms.
In the same month, Australia’s largest single asset hotel transaction ever recorded occurred when the five star Shangri-La Hotel Sydney sold to its existing Hong Kong based hotel operator, Shangri-La Hotels & Resorts, for $330 million.Other key sales in New South Wales this year included the 96 room five star boutique Observatory Hotel Sydney to Hong Kong-based Langham Hospitality Group, while the Crowne Plaza Hunter Valley and Novotel Newcastle also transacted and were both acquired by the Schwartz Family Company for $45 million and $16.5 million respectively. The most recent high profile sale to occur was the Mercure Potts Point Sydney (formerly the Crest Hotel) which sold to the Iris Group for $65 million. A number of smaller deals have also taken place including Punt Hill North Sydney and Peppers Anchorage at Port Stephens.
Mr Collins noted, “The positive sentiment for Sydney reflects the limited availability of investment grade product and the minimal new supply under construction. There are only circa 400 hotel rooms due to open in 2013 with over 300 of these rooms located at the airport. Investors are also conscious of the positive long term trading prospects in Sydney with Barangaroo and the Convention Centre redevelopment expected to boost both corporate and leisure demand.” He added, “In terms of trading, Sydney reported the second highest year-to-date Revenue Per Available Room (RevPAR) in the country at $175.” Continuing the trend experienced over the past three years, Asian investors have dominated Australian hotel investment accounting for 72% of year-to-date transaction volume.
Whilst Singaporeans were typically the primary source of investment from 2009 through 2011, Hong Kong investors have dominated this year, being responsible for 30% of total transaction volume. Meanwhile, the sale of the Marriott Portfolio set Malaysian investors firmly into second place at 29% of total transaction volumes.
Mr Collins said, “Up until now China has had very little involvement in this sector, however we have recently witnessed a growing number of enquiries from Chinese investors on hotels that we currently have on the market. So far this year they have acquired two hotel assets, representing 5% of total market volume. It won’t be long until they make their first acquisition in Sydney.”
Looking forward to 2013, Mr Collins said, “We are expecting this strong level of investment activity to continue into 2013. Trading across the country remains strong and following on from this year there are plenty of buyers looking for quality accommodation hotel assets.” He added, “For Sydney specifically, the marketing of the Four Seasons Hotel on George Street at the beginning of 2013 should set the tone for another strong year.”
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