26/06/2023
Hotels Are Increasingly a Preferred Asset Class for Active Investors - Hotel Transaction Volume Reached Record High in 2022, Outpacing Growth in Office Deals
Hotels are evolving into a preferred asset class for investors based on transaction volume trends across other commercial real estate asset classes. Specifically, hotel sales volume growth has doubled office sales growth in recent months, compared to the long-term historical average.
Annual hotel transaction volume as a percentage of office transaction volume has averaged 26% from 2006 through 2019. In 2022, hotel transaction volume spring-boarded to 53% of office transaction volume, the highest level going back 17 years. Year to date through April 2023, hotel transaction volume at $12.2 billion is 45% of office transaction volume, materially higher than the long-term average of 26%.
Annual transaction volume for hotels in 2022 was $74.9 billion — a record year for hotel transactions. The previous record of annual hotel transaction volume was in 2021 at $57.1 billion. Office transaction volume in 2022 was $141.9 billion, only 76% of the record high $186.7 billion in 2007.
Offices as an asset class are facing some of the most severe headwinds across all commercial real estate, due to a potent combination of low office utilization driven by remote and hybrid work trends, record high economic vacancy rates, record high availability of sublease space and the largest interest rate hike in recent years. Since 2019, office vacancy rates have increased 350 basis points to 13% and the amount of space available for sublease has doubled, as have borrowing costs on floating-rate debt.
Given the strong current generated by , expect this class to be highly sought after, as it provides the best hedge against and delivers highly favorable despite current high .
https://www.instagram.com/p/Ct7CIfjRawl/