By Sarah Trefethen
It may seem like every developer in the city has a hotel going up — and that’s the way it should be, according to a recent analysis by C.B. Richard Ellis.
“While some groups are concerned about the amount of supply that is under construction now in Manhattan, we are not,” said Bradley Burwell, VP with CBRE Hotels, at the firm’s quarterly press conference yesterday (Tuesday).
There are 4,700 hotel rooms under construction in Manhattan scheduled to become available in 2013 and 2014, Burwell said. Revenue per available room has increased steadily since 2009, according to the brokerage.
And while New York’s growing tourism industry is driving an increase in demand for hotel rooms, business users actually make up more than half of the hotel rooms rented in the city, according to Edward Eschmann, director, CBRE Valuation & Advisory Services Group, who noted a correlation between the office market and demand for hotel space in the city.
CBRE’s cap rate estimates for hotels this fall range from 4.5 (at the lux end) to nine (economy) percent. These numbers have been trending down, with various groups of investors vying for a piece of the Manhattan hospitality pie, Burwell said.
Manhattan has seen $2.7 billion in hotel trades so far this year, with foreign investors making up 40 percent of the activity in this market segment. Buyers such as the Sahara Group, of India, which is scheduled to buy a stake of the Plaza Hotel, are establishing New York City footholds as part of their global strategies.
Real estate investment trusts are also interested, because their stockholders consider New York a safe investment, he said. Everyone’s favorite office market, Midtown South, is also setting the pace for “interesting” new hotel development, Burwell said — further evidence that the hotel market follows office space.
That market has seen a number of “interesting transactions,” Burwell said, including the planned conversion of the Madison Square clock tower into a Marriot hotel, and he predicted that midtown south will become the city’s new hub of “new, hot hotels.”