The View | Is Hong Kong’s commercial property market healing? It’s complicated

The worst part of a three-year crisis is probably over for Asia’s premier financial centre, but much hinges on when borders reopen

Currently, the recovery is too fragile, and the appeal of other regional markets too strong, for Hong Kong to once again be a top destination for investment

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A man looks out at the Hong Kong skyline in May 2020. The city faces a massive increase in office supply in the coming years that threatens to snuff out any recovery in rents. Photo: Robert Ng

Published: 2:30pm, 19 Jul 2021Updated: 2:30pm, 19 Jul 2021

Is Hong Kong’s commercial real estate sector firmly on the path to recovery, or has the market yet to reach a bottom?

That the answer is unclear is a sign that the worst of a three-year-long crisis is over. Asia’s premier financial centre has suffered more than any other major property market, having endured a succession of external and domestic shocks that have led to dramatic declines in rental and capital values.

Prime rents in Hong Kong’s Central district, the world’s most expensive office market, have plunged nearly 30 per cent from their peak in March 2019, data from Knight Frank shows. Capital values of high street shops have experienced a much sharper decline, leaving prices more than 70 per cent down from their peak in the first quarter of 2014, according to CBRE.

In the investment market, transaction volumes collapsed to just US$6.8 billion last year, the lowest level since the 2008 financial crisis and down from just over US$23 billion in 2017, data from CBRE shows. While all major markets in the Asia-Pacific region suffered pandemic-induced falls in investment activity, Hong Kong was among the hardest hit.

Yet, since the end of last year, the city’s property market appears to have turned the corner, supported by a sharp economic rebound, with output in the first quarter of 2021 expanding much faster than expected following six straight quarters of contraction.

However, for every data point that suggests a recovery has taken hold, there is a counterpoint that indicates the occupier market will remain weak for a considerable period of time. Even in the investment market, where the improvement in sentiment is most pronounced, the pandemic has accentuated the resilience and appeal of other countries in the region.

.css-1m2rp1p{color:#34b8b5;}The View | Is Hong Kong’s commercial property market healing? It’s complicated

The View | Is Hong Kong’s commercial property market healing? It’s complicated