Deals

HK outstrips Tokyo as APAC’s top CRE market

For the first time ever, Hong Kong outstripped Tokyo to become the region’s number one commercial real estate investment destination in the first half of this year, according to data by Real Capital Analytics.  

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Completed sales of income-producing real estate assets in Hong Kong totalled $8.3 billion in the first half of 2017, propelling the island-city to become Asia Pacific’s leading commercial real estate investment market for the first time, according to research published by Real Capital Analytics (RCA).

Hong Kong’s investment volumes ended the reign of Tokyo, which has consistently held the top spot. According to RCA, Tokyo recorded a 33 percent drop in commercial real estate investment in the first half due to high prices and a shortage of suitable stock. In contrast, Hong Kong’s investment volumes were up by 5 percent in comparison to the same period a year before.

“The Hong Kong market has reached a new peak in property pricing while attracting huge inflows of Chinese capital as well as demand from the territory’s own robust investor base,” commented Petra Blazkova, senior director of analytics for Asia Pacific at RCA. “There were six mega deals involving development sites in the first half, which highlights how scarcity of land in Hong Kong is driving the market.”

Indeed, capital outflows from China are being seen as the biggest driver contributing to Hong Kong’s investment performance. More than half of the $9.5 billion deployed overseas by Chinese entities in the first half of 2017 was into Hong Kong, RCA noted. Although Blazkova did add that the capital controls would end up having a ripple effect across the region as well as globally.

The highlight deal of this year so far is Henderson Land’s HK$23.3 billion ($2.98 billion; €2.53 billion) purchase of the five-storey Murray Road car park in May. The site was the first plot of land to have been sold in the Central district in two decades. Meanwhile, the largest income-producing asset purchase was Pioneer Global’s HK$7.7 billion acquisition of the InterContinental Hotel.

Elsewhere in the region, Australia also recorded a weaker performance for the same reasons as in Tokyo. Transactions involving income-producing assets dropped further in the first half of 2017, compared to $7.6 billion in the same period last year, RCA estimated.