HK buyers back in bidding for office property
Investment funds from Australia are among those seeking to buy commercial office property portfolios in Hong Kong, according to Chesterton Petty.
But the Australian funds, along with United States and Singaporean counterparts active in the market, are competing with Hong Kong buyers, who have reappeared after a three-year absence.
Chesterton Petty reported that while foreign and mainland investors remained the prime buyers of offices in Hong Kong, SAR buyers were re-emerging.
Research director Watson Chan said Lend Lease was the most active Australian fund in Hong Kong, buying grade-A office properties but avoiding lower-grade assets.
As foreign investors continued to display a willingness to spend substantial amounts on grade-A offices, Hong Kong and mainland investors are targeting grade-B and grade-C buildings with higher rental yields at lower budgets, some of which also included naming rights.
Mr Chan said the study also showed that investment sentiment in November and December was flat, with sales activity being seasonally slow.
'Despite the lack of speculative interest, attractive rental yields for office property, coupled with a strong upside, continue to lure a few long-term investors as well as end-users,' Mr Chan said.
'Office prices showed minimal movement in November and December, with market yields ranging from 5.2 per cent to 7.5 per cent.'
Average sale prices in Hong Kong range between HK$6,000 and HK$8,000 per square foot for premium office buildings, HK$2,000 and HK$3,000 per sq ft for grade-B buildings and HK$1,500 and HK$2,500 per sq ft for grade-C properties.
Mr Chan said that although Hong Kong buyers were again taking an interest, their acquisitions had been limited by the small amount of stock, which has been tightly held.
'Hong Kong is still not experiencing a full recovery in the office sales market,' Mr Chan said.
'Good stock is extremely thin on the ground, and buyer activity has been limited but steady.
'While buying interest among local and international investors is expected to grow gradually, office prices are forecast to remain firm in the short term.'
Mr Chan expected the outlook for Hong Kong's office leasing market to improve slightly.
Leasing activity is anticipated to continue to be concentrated in decentralised locations - away from Hong Kong Island central - such as Tsim Sha Tsui and Wan Chai/Causeway Bay, with rentals expected to increase modestly in these areas.
Vacancy rates also are forecast to improve slightly across the board, with more significant declines in Sheung Wan and Causeway Bay.
'Perhaps of more significance is the Government's review of the supply of commercial land in Central and its periphery,' Mr Chan said.
