Hong Kong and mainland China commercial real estate markets on track for another stellar year

Hong Kong and China both ranked top of the league tables in Asia for commercial real estate

PUBLISHED : Thursday, 21 January, 2016, 9:15pm
UPDATED : Thursday, 21 January, 2016, 9:19pm

The mainland China and Hong Kong commercial real estate markets were standout performers in Asia Pacific last year, and investment activity is expected to be remain at similar levels this year, according to property consultant JLL.

Real estate transaction volumes in Hong Kong climbed 66 per cent year-on-year in 2015 to US$12 billion, led by Chinese investors seeking to invest offshore. In the fourth quarter, investment activity doubled to US$4.5 billion, compared with the same period a year ago, JLL said in its latest research report released yesterday.

The last quarter of 2015 witnessed the biggest office transaction in Hong Kong’s history.

Evergrande Real Estate Group acquired MassMutual Tower for HK$12.5 billion. At a unit price of HK$36,000 per square foot , it broke the record for highest unit price for an office property, according to property consultant CBRE.

Seventeen en-bloc transactions were concluded in the fourth quarter, to rank as the busiest quarter in 2015, CBRE said in its report early this month.

In mainland China, transaction volumes reached US$10.5 billion in the final quarter of 2015, up 49 per cent year-on-year. For the full year, volumes were up 51 per cent to a record 179 billion yuan in local currency terms, according to JLL.

“Although equities and the yuan were under pressure, the property investment market was supported by domestic corporates and financial institutions as well as foreign private equity real estate funds,” says Joe Zhou, JLL’s Head of Research in China.

In 2015, Shanghai continued to be China’s most active market with a total of 78.5 billion yuan traded in commercial transactions, a rise of 87 per cent year-on-year. The overall value was boosted by large deals such as the sale of Corporate Avenue 1 & 2 for US$1.1 billion.

Office property remained the most liquid real estate sector in 2015, accounting for 54.7 per cent of overall Shanghai transaction volume.

“Going forward, we do not expect any shortage in availability of funds as China’s domestic players should remain active. There will be more diversity of transactions in terms of asset class, with opportunistic investors seen likely to look for assets such as serviced apartments, residential units and grade B office towers,” Zhou said.

Tier 1 cities such as Shanghai, Beijing and Guangzhou are still expected to outperform many Asia Pacific real estate markets with strong three-year returns of around 10 per cent per annum or above, he said.

In Hong Kong, mainland Chinese corporates will likely remain as active investors in 2016, according to Denis Ma, Head of Research, JLL Hong Kong.

“With US interest rates now on the rise, we expect more assets to come to the market as owners seek to capitalise on record high prices and book tidy gains,” he said.