Investment in commercial real estate: an overview of the Hong Kong market
Analysis of the Hong Kong market showed that investment in commercial real estate in the first quarter increased by 22.6% compared with the previous period. The total amount of investments rose from $2.5 million to $1.6 billion. The reason for this interest was the end of the pandemic and the global economic recovery. The general bullish mood in the market, which is especially noticeable in comparison with the previous year, also contributes to the capital inflow.
The first quarter was the most successful in terms of retail real estate sales. This sector accounted for more than 57% of total investment in commercial property – $12.8 million. Deals in the retail sector exceeded the share of 61%. In general, the volume of investment here increased by 15.4% compared to the previous year. If we take into account sales of retail real estate in this segment, which amounted to about HK$20 mln and grew by almost 34%, the positive dynamics will be even more tangible.
Industrial areas also attracted the interest of investors, with particular activity observed on the part of foreigners. For example, the company Goodman Asia has bought two buildings in Hong Kong for a total of nearly 100 million dollars. Another major player in the market, Silkroad Property Partners, bought real estate worth 41.3 million dollars.
As for the office real estate sector, there is still not enough momentum for a full recovery. Compared to last year, the number of deals worth more than HK$100 million dropped by more than 89%. The reason for this situation in most cases is the omission of large deals.
Experts note that the inflow of capital in the retail real estate sector was influenced by the sale of facilities in areas where there are no stores. Stimulates the demand for such objects and the fact that rental rates fell by 72%, dropping from all-time highs in the market to the level of 2003. According to the forecasts of analysts, rental prices should stabilize soon. In addition, now are optimal conditions to buy retail real estate, as the cost of facilities have fallen and retail rents have increased. Experts promise a recovery of the segment soon.
Foreign investors are gradually returning to the Hong Kong market and there has been an increase in activity from local businessmen. Processes are increasingly returning to normal, erasing the negative effects of the pandemic. This gives hope that the situation will improve in the next quarter. Particularly noticeable positive dynamics in the industrial and retail real estate sectors.