Luxury, portfolio sales lead deal activity in 2018

New York saw the highest volume of single-asset deals, reaching $3.6 billion. One large deal in the market: Katara Holding’s buy of the 282-room Plaza New York from a JV of Sahara U.S. Corp., Ashkenazy Acquisition Corp. and Kingdom Holding Co. for $2.1 million per room. Photo credit: The Plaza New York (hotel exterior)

Total transaction volume for commercial real estate reached $482.6 billion in 2018. According to JLL’s “Q4 2018 U.S. Investment Outlook,” that’s a 16.4-percent increase over the previous year and the third-highest year total on record. Of that, $34 billion of transaction volume can be attributed to hotels, a 42-percent increase over 2017’s level.

But just what type of deals got investors excited last year? It’s all about the luxury hotels, according to JLL’s report, with the segment’s transaction volume increasing 76 percent over 2017. Additionally, resort deals saw a sharp increase of 40 percent year over year.

Likewise, portfolio deals were on fire in 2018, especially with the saga that played out between hotel real estate investment trusts Pebblebrook Hotel Trust and LaSalle Hotel Properties. JLL noted that hotel acquisitions volume also was driven by a 130-percent spike in portfolio activity. And that portfolio activity was seen across multiple property types, from luxury, full-service, premium select-service and economy hotels.

Related Story: Here’s the largest U.S. hotel deals of 2018

With that, here are three more things to know about hotel transactions in 2018, according to the JLL report:

Single-Asset Deals Won in These 5 Markets

Five markets together accounted for 43 percent of total U.S. transaction activity in single-asset deals last year, according to the report.

New York saw the highest volume of single-asset deals, reaching $3.6 billion. Florida followed closely behind with $3.2 billion in volume. California saw $2.9 billion in volume, while Washington, D.C., and Texas each reached $1.4 billion in single-asset transaction volume.

Related Story: How limited-service hotels fared in 2018

Private Equity, REITs Take their Piece

Together, private equity and REITs took the lion’s share of total hotel transaction volumes, accounting for more than 60 percent, according to JLL.

Private-equity buyers were responsible for 37 percent of these deals, and they focused on complex full-service hotels and portfolios. REITs, meanwhile, were responsible for 23 percent of the total hotel transaction volume in the U.S.

Cross-Border Investment Rises

A strong U.S. dollar didn’t deter foreign investment last year, according to JLL. Cross-border investment activity totaled $4.5 billion, an 18-percent increase over the previous year. There was a larger focus on portfolio assets from these investors than the previous year (volume of $2.2 billion in 2018 versus $700 million in 2017). Single-asset interest from these investors was down in 2018 ($2.3 billion volume) compared to 2017 ($3.1 billion volume).

The composition of buyers has shifted, according to the report. In 2018, Canada was the most active in the U.S., while acquisitions from Mainland China were limited to just three transactions with volume significantly down from 2016 and 2017. That slowing flow of capital can be attributed to investors in select Asian countries facing rising costs, according to JLL.

Related Story: 3 things about the U.S. economy to keep an eye on in 2019