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IPD analysis shows positive risk adjusted returns for hotel assets in Asia Pacific
SINGAPORE, 10 July 2013 – Asia Pacific hotel property assets are not the high risk investment they’re often played out to be, according to IPD’s latest Asia Pacific Hotel Investment Index, which is sponsored by Jones Lang LaSalle and Ryan Lawyers.
Based on quarterly observations of annual volatility over seven years, IPD data shows that hotel assets have delivered a relative outperformance in return, with a risk profile residing between the retail and office sectors (Fig 1). This suggests that hotels compete favourably on a risk adjusted return basis when compared against core property sectors and are actually less volatile than often perceived.
Speaking at a recent industry event, IPD unveiled that the Asia Pacific hotel property market recorded an annualised total return of 11.1 percent for the year ending December 2012 (Fig 2). This result consisted of a strong 6.7 percent income return and a 4.1 percent capital return.
In 2012, total annualised returns in Asia were marginally higher at 12.2 percent than in Australia (9.5 percent). Hong Kong was the top performer, delivering an annualised total return of 23 percent to December 2012, largely driven by capital growth.
“Whilst trading performance in key markets entered a period of consolidation after recent growth years, 2013 has witnessed much greater deal volumes, providing real evidence of investor demand. In fact, hotel transaction volumes in Asia have grown 85 percent in the first half of 2013, with a further USD 1.1 billion in the due diligence pipeline,” said Ed Fitch, Executive Vice President, Jones Lang LaSalle’s Hotels and Hospitality Group.
“In common with other sectors, investor demand remains very strong in Asia whilst the search for yield continues. We are seeing strong prices being paid and cap rates have arguably compressed, so we expect hotel returns to be supported by capital growth this year,” Ed adds.
Dr Anthony De Francesco, Executive Director of IPD Australia and New Zealand said “I’m pleased that the development of the IPD Asia Pacific Hotel Index has increased the awareness and transparency of the investment return profile for hotels in the region. Clearly, the index illustrates that returns compete favourably against other core property sectors.”
Tony Ryan, Principal, Ryan Lawyers said, "The IPD Asia Pacific Hotel Index provides valuable comparisons between the performance of hotels as against other industry sectors. On the basis of total return, Asian hotels were less affected by the global financial crisis than the office sector and rebounded more quickly. Further, over the last seven years, Asian hotels have shown a higher total return (both income and capital) and less volatility than the office sector. "
About Jones Lang LaSalle Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment Management, has $47.0 billion of real estate assets under management.
Jones Lang LaSalle has over 50 years of experience in Asia Pacific, with over 25,100 employees operating in 78 offices in 14 countries across the region. The firm was named ‘Best Property Consultancy’ in nine Asia Pacific countries at the International Property Awards Asia Pacific 2012, in association with HSBC, and was named the number one real estate advisory firm in Asia Pacific in the Euromoney Real Estate Awards 2012. www.ap.joneslanglasalle.com 200 East Randolph Drive Chicago Illinois 60601 │ 22 Hanover Square London W1A 2BN │ 9 Raffles Place #39–00 Republic Plaza Singapore 048619
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