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01/25/2001  

Europe – The World’s Most Attractive Investment Market

London, January 22, 2000 - Global hotel investors revealed Europe to be their favoured investment destination in the latest edition of Jones Lang LaSalle Hotels' biannual HISS (Hotel Investor Sentiment Survey). HISS is the only truly global survey of its kind reflecting the opinion and intentions of the hotel investment community.

"European initial yields remain some of the lowest in the world as a result of strong trading growth and investor expectations of continued income growth," said Mr Arthur de Haast, Managing Director Europe at Jones Lang LaSalle Hotels. "Investors are extremely positive about the European market and trading performance is expected to remain strong in the short term. The hottest markets at present are considered to be Barcelona, Paris, Munich and Düsseldorf."

The medium term prospects are also positive, although more cautious, which may reflect investors' concerns about the macro-economic environment and the impact any significant slow-down in the US economy may have on Europe. "Looking to the medium term, Munich is expected to continue its 'boom' as it emerges as one of Europe's hot IT spots (where Microsoft are building their European headquarters on the city's outskirts). Over the medium term, investors have most faith in Berlin, Paris, Frankfurt, Düsseldorf and Hamburg" said Mr de Haast.

"Average initial yields in Europe currently stand at 8.8% compared to 11.1% in Asia Pacific and 11.3% in the Americas" stated Nick Marsh, Executive Vice President at Jones Lang LaSalle Hotels. The German markets reflect the lowest yields, ranging from 7.5% in Berlin and Düsseldorf to 7.7% in Hamburg. Mr Marsh adds that "there is a perception that these yields are likely to move out in the short term if the dominance of German institutions come to an end". London and Paris show the lowest IRRs at 18.1%, reflecting their more mature position in the market cycle and investor demand. The highest IRRs are in the less transparent markets of Central Europe with Prague at 23%, Budapest at 23.3% and Warsaw at 24%.

Investors perceive the majority of European markets to be in the accelerated growth phase of the market cycle. The high growth cities of Barcelona, Madrid, Paris and Amsterdam have been joined by Munich and Stockholm, and are expected to enjoy strong growth into the future. Mr Marsh states that "London continues to move towards the top of the cycle and is likely to remain there due to the strong market fundamentals, a slowing in supply growth and robust profit growth among London's quality hotels". He adds that "Berlin, Prague and Warsaw are perceived to be in the early up-turn phase and offer investors significant growth potential over the medium term".

Most European markets have potential buyers, with "investors most keen to enter Stockholm, Munich, Rome, Warsaw and Lisbon" stated Mr de Haast. "An average of 31.6% of investors are seeking to buy assets throughout Europe" he added. The build sentiment is strongest in Germany, due to the lack of quality product available in the market as well as investors' expectations of future growth and the availability of finance. There are a small percentage of sellers in the high growth markets of Barcelona and Madrid, wanting to take profit growth for re-investment.

In the Americas, the commercial centres of San Francisco, Boston, Los Angeles and Washington D.C. are driving growth. Investors in the Americas demand the highest cap rates and internal rate of return. The Americas remain the most active acquisition region, demonstrating the highest level of buy and sell sentiment at 40.4% and 10.2% respectively.

Investor sentiment places most Asia Pacific markets in the late downturn and early upturn phases of the market cycle. Short term trading performance expectations for the Asia Pacific have lowered since the last survey, whilst the medium term outlook remains optimistic. Short term difficulties are likely to be experienced in eight of the 20 markets surveyed, including Sydney, but the medium term outlook for all but Mumbai is positive. Although the sentiment in South East Asian markets is largely to hold assets, the buy opinion prevails in the hotly contested markets of Bangkok, Singapore and Bali and Tokyo is the most sought after investment destination in North Asia.

Targeting the world's 750 largest investors and owners of hotels, Jones Lang LaSalle Hotels' HISS identifies the weight of opinion of future trends and establishes a benchmark position on a number of key issues.

Jones Lang LaSalle Hotels is the world's largest and most qualified specialist hotel investment banking services group. Through its 18 dedicated offices and the Jones Lang LaSalle network in more than 100 key markets it provides services in transactions, mergers and acquisitions, financial advice and capital raising, valuation and appraisal, asset management, strategic planning, operator assessment and selection and industry research. 
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