Commercial Real Estate Finance

Sadly, this follow-up to our Top 10 Hospitality Markets for Acquisitions and Top 10 Hospitality Markets for Development is much less optimistic. Once again drawn from international investor sentiment, tallied and published by Jones Lang LaSalle Hotels (NYSE: JLL), here’s a ranking of the Top 10 International Hospitality Markets in which to SELL:

 10. Milan

9. Riyadh

8. Atlanta

7. Brussels

6. Marrakech

5. Jeddah

4. Birmingham

3. Spanish Resorts

2. Lisbon

1. Cairo

Since some of you may ask, I’ll save you the trouble: Marrakech is in Morocco, Jeddah and Riyadh are in Saudi Arabia, and Atlanta is in Georgia.

This is a very diverse list, and it’s clear JLL’s respondents are wary of these markets for a variety of reasons. Cairo is an obvious choice for number 1, since the dictatorship that once ensured the market’s “stability” is no more, and its present government is nowhere near achieving the stability that will bring international capital back to Egypt’s shores. Also on this list are some casualties of the eurozone’s instability and two relative surprises, the Saudi cities of Riyadh and Jeddah. While Saudi Arabia remains one of the healthiest economies in the Middle East, its rapid growth of recent years has subsided.

Just take a look at this headline on Emirates 24/7, published last winter:

“Saudi GDP growth to halve in 2012: Economic growth is forecast to fall to 3.1% in 2012 from 6.8% in 2011″

The factors contributing to this diminished GDP growth include lowered oil production, inflation, and a decline in the Kingdom’s non-oil economic growth. All of which have signaled that these two major hospitality markets have peaked–and show little hope of maintaining the values achieved at the height of their economic strength. These markets, I suspect, will still offer plenty of opportunity for new investors, but first they must show greater potential for long-term stability.

Despite its importance as a major southern city and commercial hub, Atlanta’s commercial real estate market has faced far more challenges to its recovery than other markets of a similar size. Particularly troubling for the city’s hotel investors and operators is a hotel-motel tax, instituted in 2010 to raise public funds for a new, $1 billion stadium for the Atlanta Falcons. (A similar tax was enacted in Philadelphia to pay for the expansion of the Pennsylvania Convention Center.)

Opponents of public funding for the stadium’s development hope to introduce new legislation, which will redirect these funds to other projects considered more beneficial to the hospitality sector. If such legislation passes, perhaps Atlanta will once again show potential for hotel investors.

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