Foreign Capital into Hong Kong Real Estate Market Increases in First Half of 2015; Strata-titled Offices and Factory Buildings are Most Invested Assets
Hong Kong, September 24, 2015 – Real estate investment in Hong Kong was mainly driven by private investors, and nearly two-thirds of the total investment turnover was contributed by small-sized deals, according to CBRE’s Asia Pacific Investment Guide 2015. The guide provides a comprehensive overview of the investment terms, foreign ownership restrictions and key investment features of 15 markets.
In 2014, Hong Kong recorded a total investment turnover of US$10 billion. Deals under US$100 million accounted for 63% of the total investment turnover, while big-ticket deals of over US$250 million only had a 14% share. In terms of investor type, private investors are dominating the real estate transactions, taking up 61% of the total investment turnover, followed by corporations (16%) and property companies (9%).
Data from CBRE Research reveals that the annual investment turnover has seen a gradual downward trend from the highest point of US$15.69 billion in 2012. The total turnover in the first half of 2015 amounted to US$5.37 billion.
Kam-hung Yu, Senior Managing Director, Investment Properties, CBRE Hong Kong commented, “The shrinking transaction volume in recent years is mainly caused by the lack of saleable assets available in the market rather than any unfavorable factor in the local market. As there wouldn’t be any significant increase in new supply of commercial space from both the core and decentralized areas in the foreseeable future, we expect that the number of transactions in Hong Kong will remain thin in the second half of 2015.”
Despite the falling total turnover, it is noteworthy that foreign capital (inclusive of Chinese capital) into Hong Kong real estate has been increasing, accounting for a larger proportion of total investment. In the first half of 2015, foreign investment reached US$2.56 billion, already surpassing the annual sum of US$1.68 billion in 2014.
Figure 1. Total Investment Turnover in Hong Kong Commercial Real Estate Market
Source: CBRE Research, Q2 2015
Transactions include deals above US$10 million in the Office, Retail, Mixed, Industrial, Hotel and other sectors
“When compared with many other Asia Pacific markets, Hong Kong is a well-developed city with high market transparency and an authentic legal system to protect investors’ rights,” said Marcos Chan, Head of Research, CBRE Hong Kong, Macau and Taiwan. “There is also no restriction for foreign investors to enter the market. In addition, its strategic location coupled with its unique role in bridging the Chinese and the international financial markets also prompted MNCs, international property funds and Chinese corporations to establish presence and expand their footprint in Hong Kong.”
With
regards to the type of assets, strata-titled offices and factory buildings in
decentralized areas with the potential to be revitalized are more popular to
investors. According to the Hong Kong New
Directions in Office Property report jointly published by CBRE and Daiwa in
May 2015, mainland China finance companies are becoming increasingly active in
seeking office space in Hong Kong. Meanwhile, investment value of industrial
properties have also been on the rise since the implementation of the industrial
buildings revitalization scheme in 2010.
“Old factory buildings with the potential to be redeveloped or revamped have been sought after by investors for the sake of higher income generation and better return on investment. There are various uses of the renewed buildings, ranging from offices and hotels to smaller units for SMEs and art studios. As the government has confirmed that there are no plans to extend the scheme, we expect to see more transactions of this type of assets before the scheme expires in March 2016,” concluded Yu.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
