Stage set for robust transaction activity in 2011 and beyond -

Jones Lang LaSalle Hotels released its bi-annual Hotel Investor Sentiment Survey, which reveals that an increased 52 percent of investors indicated a dominant ‘buy' strategy over the next six months.

Concurrently, respondents exhibited a 13 percent decrease in ‘hold' intentions—a shift that signals that transaction velocity will increase in 2011. The firm's proprietary survey is directed toward the world's 6,000+ leading hotel investors and owners.

"After protracted dislocation and losses, transaction activity in the hotel real estate sector is regaining vigor. Hotel markets are heating up across the Americas. Now that operating fundamentals have clearly turned the corner, buyers are becoming increasingly aggressive as they seek to establish a foothold at historically low purchase prices," said Arthur Adler, managing director and CEO-Americas for Jones Lang LaSalle Hotels. Investors' ‘buy' sentiment is at its highest level in five years, evidencing respondents' strong interest in pursuing acquisitions at the bottom of the cycle.

Investors' intentions to buy assets are highest in international gateway markets such as Boston (71.9 percent), New York (71.7 percent), Miami (69.0 percent) and Washington, D.C. (61.1 percent) as these markets experienced the greatest rebound in hotel performance. Respondents also indicated significantly increased intent to acquire assets in Tampa, Denver, Philadelphia, Orlando and Phoenix.

Another major shift in respondents' investment intentions was the decrease in their ‘hold' sentiment to 33 percent, now at a three-year low. At the same time, investors' ‘sell' strategy inched up to 9.6 percent, the highest level since the onset of the downturn. Sellers bringing high-quality, well-located assets to market will receive substantial attention from equity-flush buyers.

Momentum in the select service hotel transactions market is building as well. "The number of select service hotel portfolios on the market has increased over the past three months and continues to rise rapidly as institutional owners and special servicers work to clear distress off their books," said Adler.

"Debt liquidity both for acquisitions re-financings is slowly increasing and exceptionally low base interest rates have created an attractive lending environment. Lenders are setting interest rate floors resulting in highly profitable spreads relative to base interest rates," said Adler.

Due to an improving economic outlook and strengthening investor confidence, respondents' leveraged IRR requirements tightened by over 210 basis points in the Americas, narrowing to 18.8 percent. This represents the second consecutive contraction surveyed since the bottom of the market, marking the slowly decreasing risk perception in the sector.