With the Sochi Winter Olympics in full swing we cast our eye further afield than local/ London commercial real estate markets. What is happening in this sector globally and what can we expect for 2014?
As we are all aware the European debt crisis hangs over the global economy like a black cloud. There was further panic when the spectre of the “double dip” recession loomed large at the end of last year.
Moving to the US, growth in their economy, the world’s largest, averaged less than 1% in the first 6 months of last year. Unemployment has hovered just above 9% for several months and long-term joblessness is at a record high.
The once reliable and profitable public markets have taken a hit but for much of the past two years, real estate investment outperformed the broader stock market. This was, however, brought to a sharp halt in September 2013 as investors feared that a weak global economy would undermine demand for commercial space.
While this was initially met with further fear, it appears that out of this gloom commercial property fought back and the hotel sector in particular came out on top.
2013 was a resurgent year for the hotel investment market in Europe, Middle East and Africa. (EMEA). Jon Hubbard, CEO Northern Europe at Jones Lang LaSalle’s Hotel & Hospitality Group states that, “with increasing conference for EMEA-wide recovery and growth it is forecast that hotel investment volume in the region should grow more than 20% in 2014 to an estimated $16 billion. It is acknowledged that some markets are at different stages of the ‘recovery curve’ but underlying feeling is much more positive leading to an increased interest in hotel investment.” A positive endorsement.
Specifically it appears that The German hotel industry remains one of Europe’s most sought-after destinations for operators and investors mainly as it continues to benefit from strong underlying market fundamentals. While still dominated by institutional investors, it is expected to remain strong in 2014. This market is expected to attract other investor types, mainly due to its status of being the third most liquid market in terms of hotel transaction volumes in Europe.
Financially beleaguered areas such as Spain, Italy and Ireland will also offer good buys and investors may be eager to move on well-positioned assets in these markets. Central and Eastern Europe has seen a good number of assets trading in 2013 after years of slow activity and this is expected to continue into the core markets. Overall it appears that another diversified and exciting year is on the cards for the industry for 2014.
Source: Jones Lang LaSalle