San Francisco, CA
The Golden State's hotel industry is currently facing a significant downturn, and the numbers are quite telling. According to a recent article from The Real Deal, hotel sales have plummeted during the first half of this year, even surpassing the decline witnessed during the Great Recession.
- By the Numbers: From January to June, hotel sales across California saw a sharp decline of 52.9% compared to the same period in the previous year. To give some context, during the end of the recession in 2009, hotel sales had dropped by 51%.
- Regional Insights: Both Northern and Southern California are feeling the pinch. Southern California experienced a 58.9% decline, with only 62 hotels changing hands in the first half of this year. Meanwhile, Northern California reported a 44.6% decline, with an equal number of hotels sold.
Major Transactions Amidst the Decline
Despite the overarching trend, there were still some noteworthy hotel deals in both regions:
- In Northern California, the spotlight was on the acquisition of the 276-room Claremont Hotel & Spa by Redwood City-based Ohana Real Estate, which went for a cool $163 million.
- San Francisco saw Texas-based Highgate and Flynn Properties take over the 135-room Hotel Huntington for $29.3 million, facilitated through a foreclosure deed.
- Down south, the U.K.-based Reuben brothers made headlines with their $1 billion acquisition of the Fairmont Century Plaza, a deal also made through foreclosure.
However, the rise in foreclosures is a concerning trend. With increasing mortgage rates, financing is becoming a challenge for potential buyers, leading to more defaults and foreclosures.
Connecting the Dots: The Broader Picture
The downturn in hotel sales might be indicative of broader market sentiments. For instance, the condominium market in downtown San Francisco is currently less appealing to many. High prices per square foot combined with steep HOA fees are deterring potential buyers. This sentiment might be influencing the hotel industry, especially given the current economic climate and evolving travel habits.
Wrapping Up
Markets are cyclical, and while the current state of California's hotel industry is concerning, it's essential to remember that the Bay Area's prices will likely remain stable through any downturn. However, the growth we've seen in previous years might not be replicated soon. For those looking to invest or find opportunities, remember: assets in this market retain their value.