The Westin Hotels portfolio sale helped turned 2013 turn into a banner year for investment in the lodging sector.
The $765-million deal — in which Starwood Capital Group acquired five Westins in Vancouver, Calgary, Edmonton, Toronto and Ottawa — was key to a year that saw $2-billion in activity in 2013, easily outdistancing the $1.1-billion in activity a year earlier, said CBRE Hotels.
“This trending is in contrast to total transaction volume of overall commercial real estate transaction activity,” said CBRE about its preliminary results for the hotel sector, in its fourth quarter report for 2013.
The activity in large urban centres helped send room prices soaring. CBRE said average price per room went up almost 30% from 2012, reaching $128,000 per room last year. Eight hotels traded for more than $200,000 per room.
Ontario drove the market with 52% of investment activity last year happening in the province. Alberta and British Columbia contributed to 38% of trades.
Based on dollar volume, institutions and equity funds were the No. 1 buyers. However, broken down by deals, private investors led the field and were responsible for 17% of transactions.
CBRE says with so many large deals having happened in 2013, it now expects fewer large-scale assets to come to the market in 2014. It also expects a slowdown in real estate investment trusts and hotel investment companies putting assets for sale.
“We believe there will be an increase in smaller private deals, particularly in Western Canada,” said CBRE, adding even with that bump total investment activity will likely decline to $1-billion in 2014.
At the same time, hotel valuations are likely to stay strong and remain near their record highs and represent the “strength” of the Canadian commercial real estate market, the report says.
Source: Financial Post