Total considerations of en-bloc and substantial-ownership transactions (over HKD 100 million) each in Hong Kong reached about HKD 12.91 billion in Q1/2021, of which 56% was contributed by deals done by Savills
- Total number of transactions for commercial property assets rebounded in Q1, up by 1.2x q-o-q and 2.6x y-o-y
- Total considerations of en-bloc and substantial-ownership transactions (over HKD 100 million) each reached about HKD 12.91 billion, of which 56% was contributed by deals done by Savills
- Institutional investors returned to the investment market looking for opportunities with higher yield and long lease term with upward rentals
- Both industrial and non-core retail assets to remain highly sought after against the new standard rate pilot scheme and anticipation resumption of cross-border travel, respectively
Hong Kong – 21 Apr 2021 – Hong Kong’s commercial property investment market saw signs of recovery after a two-year slump. Preliminary government data showed that the total number of transactions for commercial properties rebounded in Q1, up by 1.2x q-o-q and 2.6x y-o-y, to a level that is 85% of the average historical of the first quarter between 2014 and 2018 (pre-trade war and social unrest). Total considerations of en-bloc and substantial-ownership transactions for commercial properties over HKD 100 million each reached about HKD 12.91 billion, 56% of which was contributed by deals done by Savills.
Improved investment sentiment that was seen across all three commercial asset classes was largely supported by softening pricing and the removal of the double stamp duty on non-residential properties that came into effect in November 2020. Investors and end-users continued to seek bargains in the office and retail sectors, which saw pricing declining by 19.4% and 55.9% since the peak, respectively (as of Q1 2021).
Mr. Peter Yuen, Managing Director, Head of Investment & Sales of Savills commented: "Investors and end-users are now on the market looking for bargains across all sectors. It was evidenced by an increasing number of transactions at some strata-titled Grade A office buildings, which was shunned by investors last year. Meanwhile, anticipation resumption of the cross-border travel and low pricing levels have seen an increase investment volume in the retail sector.”
In the retail sector, investment volume for street shops over HKD 50 million each tripled to HKD 3.51 billion in Q1. Most of these transactions were situated in non-core areas. Meanwhile, non-core retail podium was also highly sought after on the back of resilient local consumption during the pandemic. Among the most notable transactions, a local investor sold Hing Tin Commercial Centre in Lam Tin to Kato (Hong Kong) Holdings for HKD 240.0 million (~HKD 5,929 psf) while the retail podium of The Parkville in Tuen Mun was purchased by Wang On Group and a local investor from New World Development for HKD 300.0 million (~HKD 21,648 psf).
Industrial assets continued to remain sought after against renewed investment and redevelopment interest. Drawn by lower prices, institutional funds flocked back to the market and acquired a few industrial buildings during the quarter. Among the most notable, a property fund purchased Kai Bo Group Centre in Kwai Chung for HKD 1.44 billion while KaiLong acquired Hang Fat Industrial Building in Cheung Sha Wan for HKD 965.0 million
Mr. James Siu, Deputy Managing Director, Head of Kowloon said: “Industrial transactions saw a diverse range of buyers in Q1, in particular institutional funds, local developers and local investors, among others. Investors will look for properties with a high yield, steady rental income, favourable lease term/sale and lease back option, and with potential for value-add improvement. With the local virus situation under control, and the local trading performance and the macro environment showing positive signs, Hong Kong remains comparatively attractive among regional and global markets. Funds which have been limited in their activity last year due to the pandemic have become active in the Hong Kong market again in recent times.”
Mr. Yuen added, "A positive sentiment in the investment market is reflected by the increasing number of transactions in various sectors. In regard of the pilot scheme on standard rates for land premiums deliberations, it will be beneficial to market players as the calculation of land premium is more readily accessible now, and will help investors' decision making. In this regard we expect the outlook of industrial properties will be boosted."