Hong Kong has had a torrid time in recent years: citywide protests were followed by the pandemic and the longest-lasting covid restrictions in the world. Since removing all restrictions in March, Hong Kong has been hammered by rocketing interest rates.
Meanwhile, investment demand for real estate assets is suffering from the highest interest rates in developed Asia-Pacific. “With HIBOR rates approaching 5.2 percent (as of 24 July), the financing cost for real estate investment deals lies in a range of about 6.7-7.7 percent after the typical lender’s margin. Even after recent expansion, cap rates for the majority of commercial properties in the territory are below 4.5 percent,” says Andrew Moore, head of real estate, Asia-Pacific, at Schroders Capital.
In Hong Kong, the office leasing market remains under pressure, with significant supply and vacancy of about 16 percent. However, the retail market is now seen as a bright spot, particularly with tourists from Mainland China returning.
2
Hong Kong-based fundraisers in the
APAC top five$6bn
Total amount targeted
by funds in market
Simon Smith, head of Asia-Pacific research at real estate services firm Savills, says: “Although Hong Kong workers are very much back in the office, vacancy rates and future supply will keep rents subdued. We expect a far more positive environment for retail and hospitality next year as Mainland tourist numbers recover to pre-2019 levels.”
Despite tough times, the city remains a headquarters center for regional businesses. It is also home to a number of real estate investment managers – and the region’s largest, ESR Group, is listed on the Hong Kong Stock Exchange.
Moore says: “Hong Kong’s fundamental strengths should not be understated. The territory remains the natural gateway to Mainland China, APAC’s largest economy making up about 44 percent of regional GDP. Hong Kong is among APAC’s largest centers for international banking measured by loans, home to one of the world’s six largest stock exchanges and is still one of the largest asset management hubs in the region.”
August 2022
Hong Kong-based investment manager ESR Group and developer Chinachem Group teamed up to develop a 1.4 million-square-foot cold storage and logistics facility in Kwai Chung, Hong Kong
January 2023
Hong Kong-based PAG and Singapore-based Mapletree Investments bought the 886,703-square-foot Hong Kong office building Goldin Financial Global Centre from receivers for $713 million, less than half what Chinese developer Goldin Financial Holdings had been asking for in 2020
April 2023
Carlyle spin-out Ascent Real Estate partnered with Hong Kong family office Chow Tai Fook Enterprises to launch a China real estate joint venture that will invest in sectors suitable for Chinese real estate investment trusts
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