Hong Kong property

Mainland Chinese investment in Hong Kong office buildings hits new high in first half

Interest is also extending to retail space and industrial buildings, analysts say

PUBLISHED : Friday, 06 July, 2018, 9:02am
UPDATED : Friday, 06 July, 2018, 9:01am

Mainland Chinese investment in commercial property in Hong Kong rose to a new high in the first half of this year, propelled by several high-profile purchases of office towers.

A total of 15 sales of commercial properties worth a total of HK$31 billion (US$3.9 billion) were completed by mainland investors in the first half, making up 35 per cent of the total commercial property sales of HK$89 billion, according to figures from CBRE.

The figure is higher than the 20 per cent contribution from mainland investors in 2017 and five times that of 2014.

“Mainland investors have a strong interest in Hong Kong’s office towers. They love those with ocean views,” said Tony Ng, senior director for capital markets at CBRE in Hong Kong. “Office towers in major cities like Beijing and Guangzhou cannot enjoy that.”

“We will see more mainland Chinese landlords as their interest has also extended to shops, retail podiums and industrial buildings,” he said.

Of the 15 deals, nine were for office buildings, which are seeing their values increase because of low vacancy rates and high rents.

Among such transactions, Henglilong Investments paid HK$15 billion in June for Hong Kong developer Swire Properties’ 21-storey Cityplaza Three and the 24-storey Cityplaza Four towers in the Taikoo Shing residential and commercial development in Quarry Bay, in the east of Hong Kong Island.

In May, mainland developer Jiayuan International bought a total 70.1 per cent stake in several projects including Gold Sun Industrial Buildings and Oi Sun Centre in Tuen Mun for a combined HK$2.62 billion. Meanwhile in January, Shenzhen-listed China Create Capital bought a grade A office building in North Point from Henderson Land Development for HK$9.95 billion.

Office rents in Hong Kong on the brink of soaring past all-time high set before 2008 financial crisis

According to CBRE, the vacancy rate in Central district, Hong Kong’s business heart and a much sought-after location, has dropped to 1.1 per cent, while separate data from property consultants Knight Frank put the vacancy rate of grade A offices in Central at 0.8 per cent, below 1 per cent for the first time in 17 years.

Average rents in Central as of the end of June had increased by 4.4 per cent to HK$135 per square foot, nearing the historical peak of HK$137 recorded in 2008.

“For the whole year, we expect Central rents to increase 5 per cent to 10 per cent. In other words, a new record could be created any second,” said Alan Lok, CBRE’s executive director, advisory and transaction services.