Washington, DC remains a highly sought after hotel investment market -

Fourth most active urban transactions market in US Hotel acquisition volume in 2012 reached a five-year high in Washington, DC, fueled by the sale of the 888-room Grand Hyatt, which represented the largest ever hotel transaction in Washington, DC.

Total transaction volume increased 85% over 2011 levels, while average price per key rose 15%, representing a multi-year high.

To put the market in national perspective, Washington, D.C. ranked as the fourth most active investment market in the U.S. in 2012, only behind New York, San Francisco and Chicago. Factors driving this strong investor interest include market stability and diverse demand sources.

With a large number of REITs headquartered in the greater Washington area, REITs have consistently had a vested interest in the local lodging market, and accounted for 80% of buyer volume in the city in 2012. Additionally, as lodging REIT stock prices continue to rise, we anticipate that this buyer group will continue to be a significant player in the transactions market.

Following a blockbuster year, we anticipate that transaction activity will be relatively subdued during the first half of 2013 as investors observe how new legislation and budget cut concerns affect lodging demand.

The second half of 2013, however, is expected to see a pickup in trades concurrent with the expected improved performance of local hotels, representing investor interest and momentum that will continue into 2014. Interest from off-shore investors is also expected to increase in 2013 and beyond.

While foreign investors have focused primarily on New York and West Coast gateways over the past several years, we anticipate that Washington, D.C. will increasingly be on off-shore investors' radar, as international groups seek trophy and/or unencumbered/independent hotel acquisitions as a way to enter this market.

Active sellers will include institutional funds seeking liquidity, brands in cases where they can retain management contracts, and owners seeking to take advantage of the increased availability of debt capital for purchases.

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Jones Lang LaSalle's Hotels & Hospitality Group serves as the hospitality industry's global leader in real estate services for luxury, upscale, select service and budget hotels; timeshare and fractional ownership properties; convention centers; mixed-use developments and other hospitality properties. The firm's more than 265 dedicated hotel and hospitality experts partner with investors and owner/operators around the globe to support and shape investment strategies that deliver maximum value throughout the entire lifecycle of an asset. In the last five years, the team completed more transactions than any other hotels and hospitality real estate advisor in the world totaling nearly US$25 billion, while also completing approximately 4,000 advisory and valuation assignments. The group's hotels and hospitality specialists provide independent and expert advice to clients, backed by industry-leading research.

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