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The property investment market contracted substantially in the first half of this year amid the outbreak of the Iraq war and the crisis over Sars, or severe acute respiratory syndrome.

The sales value of large deals tumbled 34 per cent year on year while volume shrank 26 per cent, according to commercial real-estate services firm CB Richard Ellis.

A total of 14 investment properties changed hands in the past six months with a total value of HK$3.33 billion, the agency said in its survey of transactions that exceeded HK$100 million each.

This compared with 19 transactions worth HK$5 billion in the first half of last year.

However, real-estate and investment-management services firm Jones Lang LaSalle recorded 27 transactions worth more than HK$50 million each in the first half with a total value of HK$4.4 billion, down 24 per cent year on year.

CB Richard Ellis executive director Henry Lam Wai-hon said the investment market during the first half was satisfactory given that sentiment had been affected by the Iraq war and the Sars outbreak.

He believed the market would become more active in the second half as the rental market improved and since Sars appeared to be under control.

The biggest deal so far this year is the purchase of Vicwood Plaza office tower in Sheung Wan by a joint venture between Morgan Stanley Real Estate Fund and Pamfleet (HK) for HK$842.8 million, which closed last month.

Pamfleet was formed in 2000 as a management buyout of Jardine Fleming's JF Property Management and JF Property Services and provides real-estate investment and development advisory services throughout Asia and Australasia.

Jones Lang LaSalle investment department head Tony Lo, the sales adviser of Vicwood Plaza, said recent investment transactions included GD Real Estate Tower in Central for HK$105.84 million, Workington Tower in Sheung Wan for HK$61 million and and 88 Gloucester Road in Wan Chai for HK$196 million.

Mr Lo said this was a sign that investors were actively seeking investment opportunities to capitalise on the record-low interest environment despite the volatile market.

Last week, Jones Lang LaSalle facilitated the HK$108 million sale of Anada Tower in Central. Other properties sold earlier included Laford Centre in Cheung Sha Wan for HK$192 million, car-parking spaces at Provident Centre in North Point for HK$110 million and Full Win Commercial Centre in Mongkok for HK$130 million.

Other prominent transactions included two office buildings - Kincheng Bank Building in Central worth HK$300.9 million and East Town Building in Wan Chai costing HK$216 million - according to CB Richard Ellis.

A retail podium at 8 Russell Street in Causeway Bay was sold for HK$367 million and a residential site on 18-24 Pokfield Road in Pokfulam sold for HK$320 million.

Debt-laden developer Lai Sun Development has recently put up an investment property for sale, commercial building Causeway Bay Plaza phase one.

One developer said it had received information about the Causeway Bay property and was looking at the potential of the 260,000-square-foot building, which generated an annual rental income of about HK$80 million.

Lower floors of the building contain retail shops and restaurants while higher levels have offices.

The building was 87 per cent occupied and valued at HK$1.45 billion last year, sources said.

Mr Lam expected well-located single-ownership office buildings at decent prices would attract investors and their transactions would dominate the market in the second half of the year as office rentals were bottoming out.

Buyers would offer cautious prices, considering that office rentals could fall further, he added.

'Fewer [transactions for] luxury residential properties will be seen. They are hardly available at decent prices.'

He said market sentiment was improving and investors were hunting for higher-yield properties.

Mr Lam said there had been a strong market response to two hotels put up for sale by Regal Hotels International.

He said potential purchasers were making offers, although there were some discounts during the atypical pneumonia outbreak, when the hotel business was seriously affected.

Regal Oriental Hotel in Kowloon City was estimated to be worth HK$410 million last year and Regal Riverside Hotel in Sha Tin carried an estimated value of HK$990 million.

Regal Hotels chairman Lo Yuk-sui said last week that the recent health crisis had had some impact on the progress of selling the hotels. He said several local and overseas buyers were in talks for the 400-room Regal Oriental Hotel.

The progress towards selling was slower for the 830-room Regal Riverside Hotel because of its bigger size.



Value of big sales falls by 34pc in first half