Market Report 2022

Colliers Market Report 2022

107

Hotel Industrial/logistics Retail Residential Of f ice

Investors have returned The hotel investment property market collapsed in early 2020, with no significant transactions taking place due to the consid erable uncertainty about the demand situation, all the while that financing possibilities froze up. In 2020-2021, many inves tors made it their strategy to snap up distressed hotel proper ties in the increasing absence of hotel guests, but only very few operators were forced to sell, and these few transactions did not fit the description of fire sales. Although transaction activity has slowed due to the coronavi rus outbreak, this is believed to be a passing phenomenon that may quickly return to normal. International investors with a stronger risk appetite are increasingly zooming in on hotels on account of the relatively high yield premium currently achieva ble in this segment compared to other property segments. At year-end 2021, the yield on a well-located hotel property let on a long lease agreement was approx 4.25%. By comparison, the yield on well-located office properties was approx 3.00% at year-end 2021. The yield spread between the two property seg ments was as narrow as 50 bps before the pandemic. In view of the increased placement requirements among inves tors and yield compression in other property segments, it can not be ruled out that hotel property yields will come under downward pressure when the market and operations stabilise over the coming years.

Steel House, Copenhagen V

Bankruptcy data yet to tell the full story Despite an extensive call for financial relief packages to coro nastricken businesses, including the hotel industry in par ticular, 2020-2021 saw a total of only 16 and 3 bankruptcies, respectively, among domestic hotel companies. By compari son, the number of bankruptcies was also 16 in 2018. Apart from relief packages, it has been crucial to operators that land lords have either reduced or deferred rental payments. Held together with the banking sector granting additional loans and deferring payments, liquidity has been sufficient to maintain hotel operations. However, it is difficult to conclude to which extent COVID-19 has been the direct cause of actual bankruptcy filings. It is fea sible that the pandemic has merely served as a catalyst for the natural elimination of less resilient businesses, forced to turn the key due to high debt levels and a prolonged period of mis management and poor operations. As a result, the full scale of the fallout caused by the coronavirus outbreak will take some time to feed through to bankruptcy numbers, which will not be revealed until relief packages are discontinued, and banks and landlords no longer extend favourable terms for loans and rental payments. However, during the boom years preceding the pandemic, many hotel companies have built strong capi tal reserves, and we therefore do not foresee an exceptionally large wave of bankruptcies once relief packages and various initiatives by banks and landlords cease.

 MUHAMED JAMIL EID , muhamed.eid@colliers.com

AC Hotel Bella Sky, Ørestad, Copenhagen S