Commercial Real Estate News Wrap Up: Week of October 13, 2015

October 13, 2015

There seems to be no stopping the hotel sector. Revenue per available room (RevPAR) has grown significantly over the last few years, according to a story in Forbes. “A November PwC report forecasted RevPAR to increase 8.2 percent in 2014, up from 5.4 percent in 2013. The company also expects 2015 occupancy rates to reach 64.9 percent, the highest level since 1984, and RevPAR to increase 7.4 percent,” Forbes reported. Growth is due to a number of factors. Aside from a generally strengthening economy, a booming energy market is driving growth in Texas cities. In New York, conversion of hotels into apartments and condos over the last decade or so has caused a drop in supply coming in as tourism has increased. Millennials are also forcing changes in the way new hotels are developed. Smaller rooms with larger common areas and a focus on more upscale services with less interaction with staff are in demand by younger business travelers.

The American consumer is spending more, but the Chinese economy could be a major drag, causing a push and pull when it comes to the Federal Reserve’s decision to raise rates. Economist Marci Rossell said as much during a keynote speech at the CREW Network Convention & Marketplace in Washington State. Rossell predicts that the “Chinese crisis could make Japan’s in the late ‘80s and early ‘90s appear small by comparison.” She said a slowdown in China is going to be “very, very painful. Despite these warnings, consumer confidence and a host of other positive trends shows a Fed willing to raise rates by the end of the year, however slight that increase might be.

A report that recently came out shows that 2015 will quite possibly be the best U.S. office market since before the recession. Measured in terms of absorption and dropping vacancies since before the recession, the recovery “seems to have found its legs, with year-to-date figures for most metrics well ahead of 2014 as well.” The improvement has been gradual, which is why anyone might be excused to have missed it.

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