Investor interest surges in grade-B office blocks
Investor interest in grade-B office space is rising, with more than HK$1 billion worth of premises traded this month.
The latest transactions were the sales of Victoria Heights Building and Energy Plaza in Tsim Sha Tsui.
Analysts said buyers mainly were long-term investors attracted by the yields of more than 6 per cent for grade-B offices.
The sharply increased volume of transactions within a short time showed investors were convinced prices in the sector were close to the bottom, they said.
'En-bloc, grade-B offices usually have a guaranteed rental yield of 6 per cent to 7 per cent, which is better than grade-A offices,' said Antonio Wu, director of Colliers Jardine's investment section.
He said traditional investors might choose new premises, but it would take them a long time to lease out the units.
Asking prices of grade-A offices were relatively high, prompting investors to remain cautious.
Investors certainly preferred offices with high occupancy rates and relatively low asking prices, said Mr Wu.
Victoria Heights Building on Nathan Road was bought for HK$180 million by Hip Shing Hong, a privately run developer and investment company which has been trading for more than 50 years.
'The property provides a yield of about 6 per cent, which meets our basic requirement,' said David Fong Man-hung, deputy managing director of Hip Shing Hong.
'The shop on the ground floor of Victoria Heights Building rented by Bossini provides a good return, while the offices are fully occupied.'
He said the company was looking for similar, relatively new properties in good locations with good maintenance and stable tenancy.
Mr Fong expected China's entry to the World Trade Organisation would benefit the trading industry and the prices of grade-B offices would rise within the next two to three years due to increasing demand.
Hip Shing Hong is a land-development group of companies. Its investment portfolio for lease consists of 1.38 million square feet of commercial, domestic and industrial space. Toys producer Early Light Industrial also bought two grade-B offices this month.
Its purchase of Energy Plaza from joint owners Sino Land, Kerry Properties and Chinachem Group for HK$453 million marked the single largest transaction of the month.
The building provides more than 200,000 sq ft of office and retail space, meaning an average price of about HK$2,000 per sq ft and a guaranteed rental yield of 8 per cent.
Early Light Industrial also bought a smaller office building on 361 Shau Kei Wan Road for HK$90 million, representing a lower average price of about HK$1,100 per sq ft.
Other transactions of grade-B offices this month have included Empire Land Commercial Centre and Winsan Tower in Wan Chai, worth HK$125 million and HK$138 million respectively.
Investors have become increasingly interested in this sector from the beginning of this year.
CB Richard Ellis had identified 11 en-bloc transactions of grade-B buildings with a total consideration of about HK$1.5 billion in the first half of this year.
