Hotel and tourism-related assets are in hot demand in Perth – but despite strong offers flowing from offshore sources, owners in the tightly-held market are not necessarily willing to sell.
Hotel and tourism-related assets are in hot demand in Perth – but despite strong offers flowing from offshore sources, owners in the tightly-held market are not necessarily willing to sell.
Cygnet West Head of Commercial Agency Wayne Lawrence said enquiry levels for tourism-related assets such as short-stay accommodation facilities had been steadily rising for some time, in line with hotel occupancy in the Western Australian capital.
Hospitality giant Accor recently reported that Perth’s occupancy rate of 68 per cent was second in the nation, trailing only Sydney’s rate of 71 per cent.
Accor, which operates 25 hotels in WA, said Perth’s occupancy had risen by 7.5 per cent over the past 12 months.
Mr Lawrence said the uplift in interest in Perth tourism assets was indicative of a swiftly changing market.
“Pre-COVID, Perth was a pretty soft market on the tourism front, and also for business travellers as well,” Mr Lawrence said.
“Occupancy levels weren’t fantastic, and the room rates weren’t that great either.
“We have a few owners here in Perth that went through some difficult times during COVID and probably thought that they would like to get out, but now there is no one in a screaming hurry to sell, there’s no desperation.
“There were more vendors that were open to a sale last year than there are now because they are now getting good occupancy, good room rates and the pressure has come off.”
Mr Lawrence said a withdrawn sales campaign for the historic four-star European Hotel in Perth’s CBD, which was offered up for sale in early 2022, neatly illustrated how the market had shifted.
“The European Hotel is owned by a private investor and he was exploring a sale after COVID hit,” he said.
“He was definitely a seller, but the price that he was basing his expectations on was at a certain level.
“We’ve now got a few offers above that price and he just won’t accept them.
“He’s not selling any more, even though we’ve got a price that’s stronger than what he would have sold for a year and a half ago.”
Mr Lawrence said the enquiry for Perth hotels was coming from offshore, Singapore in particular, and the east coast funds.
He said there was similar interest building for student accommodation assets in Perth, whether they be completed projects or inner city development sites.
“Most of the capital has really moved away from traditional office assets and is looking for alternative investments,” he said.
“If you had a student accommodation tower to sell in this market there would be strong interest and the yields would be pretty sharp, because there seems to be a weight of capital chasing that type of asset class.
“At the moment generating interest in office is tough, yields have softened quite a bit.
“It’s more a product of the capital that’s based in the US and how they view office assets. Cities like San Francisco and New York have been faced with significantly increasing vacancy rates and falling prices.
“It’s been hard to convince US and Canadian pension funds to buy offices as an asset class in Australia, let alone Perth.”