Hong Kong is no longer the largest commercial real-estate market in Asia-Pacific, having lost its crown to Tokyo in 2019, data and analytics firm Real Capital Analytics said on Thursday. Tokyo and Seoul took the first two spots. In 2018, they were in second and third spots, behind Hong Kong. “After experiencing years of strong rental and capital value growth, Hong Kong’s property market is entering a downward phase while the local economy faces pressure from both external and internal volatility and tensions,” said Terence Tang, managing director, capital markets, Asia, at Canada-based commercial real-estate services company Colliers International. Since June, the city has been rocked by its worst political crisis in decades, with anti-government protests hurting Hong Kong’s tourism and retail sectors in particular. It was also affected by the US-China trade war, which weighed on trade and investment activity. In the next 12 months, Hong Kong is likely to be a buyers’ market, with property prices returning to a more reasonable level. This, in turn, will prompt investors to seize opportunities and seek huge discounts. “Affluent investors and institutional funds are also eyeing opportunities presented by distressed sales of assets,” Tang said. Business activity in Hong Kong has also been affected by the Wuhan coronavirus outbreak, which will have “short-term implications on investment volume”, according to property consultancy CBRE. The company added that, with the exception of 2018, owing to a one-off large commercial property deal in Hong Kong, Tokyo had always been the largest commercial real-estate market in Asia-Pacific. “Funds across the region have raised capital in the past two years, which they are looking for somewhere to deploy. Japan is an attractive destination because of the depth and the breadth of its market, as well as low interest costs,” said Ada Choi, head of occupier research, Asia-Pacific, at CBRE. The Japanese capital is likely to remain an investors’ darling as demand is expected to continue to outstrip supply, particularly when it comes to offices. “In Tokyo’s office market, asset performance remains solid. A near-term increase in pre-commitments already exceeding 70 per cent of 2020 supply has reduced vacancy, keeping the average rental growth around 3 per cent,” said Colliers’ Tang. Meanwhile, domestic investors had ramped up activity in Seoul’s commercial property, which had “more than tripled in the period”, Real Capital said. “Investment momentum in Seoul has been building for some time,” it said. Sydney remains the fourth-largest commercial market in the region, while Beijing has leapt three notches to take the fifth spot. “The metro [Beijing] registered a record year for income-producing deal activity and climbed into fifth place,” Real Capital said.