Hong Kong’s mid-sized developers seek to create markets in unlikely niches to survive city’s worst economic slump on record

Hong Kong’s real estate developers, particularly mid-sized companies that rely on a narrow segment for their sales, are diversifying their product offerings to find potential revenue in new market niches to help them survive the city’s worst recession on record.

Some of them are developing data centres, while others are expanding into industrial facilities and self-storage warehouses, said Maggie Hu, an associate professor of finance and real estate at the Chinese University of Hong Kong. Mid-sized developers are particularly vulnerable to the adverse impact of the business downturn in Hong Kong, giving them a bigger incentive than large, cash-rich companies in adapting to changing needs of the market.

“(They) are often much less diversified in their assets and types of income streams, [so] diversification is more important and imperative for them to navigate through the crisis,” Hu said. “Different types of real estate assets are affected by the pandemic in different ways. Self-storage facilities, industrial facilities and data centres have faced much less declines than malls, lodging, hotel and housing.”

Far East Consortium Limited, the biggest operator of three-star hotels in Hong Kong, is going into the business of providing private vaults for customers to store their valuables. The operator of the Dorsett hotels in Wan Chai and Kwun Tong launched 4,500 safe deposit boxes in a private vault measuring 3,000 square feet (279 square metres) at the basement of its Silka Far East Hotel in Tsuen Wan, converting space that previously hosted a foot massage parlour, and a bank vault.

Kowloon Development, a developer of tiny flats in Hong Kong, recently diversified into mass retailing, with the 2,000-sq ft Soda Mall that features a supermarket and a grocery store for health foods.