Wave of Asian capital propelling Australian hotel market

Sydney, 17 September 2015 – Australia’s hotel market has emerged a key investment hotspot in Asia Pacific, with more than $2.5 billion in transactions completed in the first half of 2015 – the second largest transaction pipeline across the region.

CBRE’s 2015 Asia Pacific Hotel MarketView report shows robust appetite for hotel property across the country, with Australia ranking second behind Hong Kong in terms of transaction activity.

CBRE Hotels Senior Director Wayne Bunz said offshore capital continued to target Australian hotel assets, with investors seeking quality assets in both primary and secondary locations.

“Foreign investors continue to inject capital into Australia’s hotel market, seeking out quality assets in major locations such as Melbourne and Sydney, as well as other capital cities that offer attractive and less-competitive opportunities,” Mr Bunz said.

“The Four Points by Sheraton sale in Perth for $91.5 million is testament to the growing strength of the Australian market and its continuing appeal as a sought after destination for hotel investors.”

In further evidence of Chinese capital targeting Australian hotel assets, an offshore buyer has scooped the Pensione Hotel in Melbourne for circa $26 million.

Mr Bunz, in conjunction with fellow agent Scott Callow, negotiated the freehold sale of the 114-room Pensione hotel on behalf of Paul Fischmann of Eight Hotels. Jian Chen of Third Fan Pty, who also recently acquired the Ibis Styles Kingsgate in, Melbourne, purchased the asset. Eight Hotels has maintained the business component of the Pensione, taking a leaseback of the hotel’s operations.

CBRE Hotels is also preparing to conclude a number of other sales over the next three weeks, with Expressions of Interest campaigns due to close on the 225-room Tune Hotel in Melbourne, the Wyndham TRYP Hotel in Brisbane’s Fortitude Valley, the Ibis Styles Cairns and the Crowne Plaza Terrigal.

“Asian investors are continuing to look abroad for attractive investments that offer favourable returns,” CBRE’s Rob Cross said.

“Chinese are looking for long-term generational wealth creation when acquiring substantial freehold land banking opportunities like Crown Plaza Terrigal, which comprises nearly 11,000sqm of the beachfront in Terrigal.”

“As highlighted by the recent flurry of activity, Australia remains a sought after market, with investors attracted to its relative economic stability and high growth returns.”

The report shows in terms of outbound capital within the Asia Pacific region, Chinese capital was the most active during the first half of 2015, with all offshore investment activity from China injected into Australia during this period.

The largest offshore transaction undertaken by Chinese capital was the Hilton Sydney, which was acquired by Bright Ruby Resources for $442 million.

CBRE Research shows sustained growth in Australia’s hotel sector will further fuel growth in the investment market, leveraging its appeal on the global stage.

Australia and New Zealand experienced the largest growth in tourism numbers over the first six months of the year, with an 8% lift year-on-year – the largest increase in the Asia Pacific region. This translated to a 7.3% increase for Australia and 9.7% spike for New Zealand.

Mr Bunz said the upward momentum in Australia’s hotel sector would continue to underpin strong appetite levels for well-positioned assets in the nation’s gateway cities.

“This wave of offshore capital is showing no signs of abating, with investors continuing to focus on large mature markers, which offer secure investment opportunities, as well as the smaller, regional markets, which also offer attractive returns,” Mr Bunz explained.

In the first six months of 2015, Sydney and Melbourne achieved the highest hotel occupancy rates in Asia Pacific alongside Singapore, Hong Kong, Tokyo and Osaka.

CBRE’s Robert McIntosh said the performance outlook for Australia remained positive for the rest of 2015.

“Strong operational trading will continue to be underpinned by the continued economic growth of almost 3% per annum on average, the economic transition from mining investment to export production, the weaker Australian dollar, the increase surge of Chinese tourists and the dominant domestic tourists,” Mr McIntosh said.

Australia’s increasing tourism will be supported by the $350 million 600-room hotel development part of the $3.5 billion redevelopment of the Darling Harbour Convention Centre. The project will deliver Sydney’s second largest and grandest hotel, as well as being the city’s first newly built five-star hotel in two decades.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.