Job Growth and Rebounding Oil Industry Sustain Room Demand
Submarkets such as the Galleria remain attractive to investors and lenders due to the desire to place capital in Houston and the quality asset of the Hyatt Galleria drew heavy lender interest for the refinance.
HOUSTON—On the heels of a challenging 2015 and 2016 due to downward pressure on the oil and gas sector, the Houston market was further devastated by Hurricane Harvey in late August last year. While Harvey boosted occupancy and revenue metrics as displaced residents sought housing in late 2017, strong job growth and the rebounding oil industry further sustain room demand this year.
Job growth in Houston rose at a faster clip than the national average during the year ending in the second quarter, and the oil and gas industry has made a significant recovery since its low in 2016. This is resulting in a variety of forces propelling hotel occupancies in Texas.
Most significantly, business travelers are visiting the metro to attend meetings and the state overall continues to generate strong occupancy and RevPAR gains, primarily led by the Houston market, according to a hospitality report by Marcus & Millichap. As a result, Houston boasted the strongest occupancy gains and RevPAR growth among the state’s major metros during the past 12 months.
An example of the strength of the hotel market are the numerous financings taking place in the metro. Specifically, the recent refinance of the Hyatt Regency Houston Galleria, a 325-key hotel, was secured by JLL. Metlife provided the $60 million loan, which will be used to retire the existing construction debt.
Senior managing director Jeffrey Davis, executive managing director Mike Melody, managing directors Kevin Davis and Paul House, and senior vice presidents Matt Nowaczyk and John Ream led the JLL team on the transaction.
“The current environment is very conducive to refinancing. The cost of debt is attractive to owners and we’re seeing an increased number of lenders active in the Houston market,” Ream said. “Hyatt Regency Galleria is backed by sponsorship with a proven track record and strong in-place cash flow, which made this an attractive opportunity to lenders.”
The recently constructed, institutional-quality hotel is located in the Uptown submarket, adjacent to The Galleria, a 2.4 million-square-foot high-end retail center. Amenities include more than 19,000 square feet of flexible meeting and event space, two food and beverage outlets, an outdoor pool with a sundeck and a fitness center.
“Premier submarkets like the Galleria remain extremely attractive to investors and lenders due to their amenities, attractions and accessibility,” Ream tells GlobeSt.com. “This opportunity drew heavy lender interest– a testament to the quality of the asset and lenders’ desire to place capital in Houston.”