Hotel investments across Asia Pacific reached US$4.5bn during the first six months of 2019, with domestic buyers in Japan, China and Australia accounting for more than half of the capital.
In H1 2019, Japan’s hotel market recorded the highest domestic transaction volumes in the region at US$1.14bn, according to JLL.
Japanese REITs led the way, with deals like Japan Hotel REIT’s US$563.5m purchase of the Hilton Tokyo Odaiba hotel in April.
“Demand from Japanese institutional investors is growing due to low borrowing costs and expectations of continued market growth on the back of upcoming large-scale events such as 2019 Rugby World Cup, Tokyo 2020 and the 2025 World Expo,” said Mike Batchelor, CEO Asia, JLL Hotels and Hospitality.
“We believe that the 12 per cent forecast increase in international visitors to Japan in 2019 will continue to spur local investors to explore hospitality opportunities in major cities such as Tokyo and Osaka over the rest of the year.”
The Chinese hotel investment market followed closely behind Japan with US$1.1bn in domestic transaction volumes.
Local internet giant JD.com bought the Beijing Jade Palace for an estimated US$400m during the first quarter of 2019, with plans to convert the hotel into a mixed-use office development.
“This deal is part of a wave of domestic investors buying hotel assets for conversion to alternative uses such as offices,” said Batchelor.
“As hotel deals are driven by a price per square metre basis in China, they tend to be priced lower than other commercial properties. Given the low yield profile of such transactions, foreign investors are likely to be priced out of the hotel market, leading to more domestic transactions in China.”
The Australian market recorded US$388.2m worth of hotel deals during the first half, with 80% led by local investors who purchased assets like the NEXT Hotel Brisbane, Hilton Surfers Paradise, and the Mayfair Hotel Adelaide.
“Whilst domestic investors will continue to be very active, the Australian hotel investment market remains a firm focus of offshore groups,” said Craig Collins, CEO Australasia, JLL Hotels and Hospitality.
“Based on expected transaction activity for the second half of 2019, we expect international capital to dominate hotel acquisitions over the rest of the year.”