Acciording to Colliers International’s Hotel INNvestment Canada Report Q.1 2015, Canadian lodging real estate saw significant activity through the first quarter of 2015 with approximately $730 million in total transaction volume from 29 trades reported across the country, almost quadruple deal volume from Q.1 2014 and representing the fourth highest quarter on record.
When removing strategic trades, transaction volume reached $364 million, almost double that of Q.1 2014. The substantial increase in volume is attributed to an uptick in transactions over the $10 million threshold which represented almost 90 per cent of volume for the quarter, including notable properties such as the 1,363-room Fairmont Royal York Hotel ($186.5 million), the 556-room Fairmont Hotel Vancouver ($180 million), and the sale of a majority interest of the Westin Grand Vancouver (price confidential).
Overall, 5,665 rooms transacted through the first quarter with average per room pricing (excluding strategic trades) growing to $79,400 from $51,700 in Q.1 2014, reflective of the high-quality assets which traded in urban centres such as Toronto, Vancouver, Montreal, and Edmonton.
REGIONAL TRANSACTION ANALYSIS
Regionally, Eastern Canada was the most active in the country accounting for 23 of the quarter’s 29 trades. Ontario continued to be the most dynamic and diverse hotel investment market accounting for 50 per cent of the quarters volume ($367 million) with 17 trades ranging from limited-service properties to large urban assets attracting a wide range of investors. There were six trades in Western Canada, largely led by British Columbia including three transactions totaling $261 million, with limited activity in Alberta. When excluding strategic trades, Western Canada continued to enjoy a premium on per room pricing, averaging $111,600 compared with $76,200 in Eastern Canada.
FULL YEAR OUTLOOK
With strong momentum at the start of year, we believe the market can likely support $1.25 to $1.5 billion in transaction volume for full-year 2015, supported by favorable lending conditions, a healthy pipeline of investment opportunities and a diverse pool of traditional and new investors eager to expand their portfolios within the hotel asset class.