Why are Asian property investors repurposing old buildings during Covid-19? Hong Kong, Kuala Lumpur and Shanghai are leading the trend

Jan 3 , 2022

JC Mandarin Plaza in Shanghai, transformed from an underperforming hotel into a high-end commercial complex. Photo: Gensler

Design firm Gensler turned JC Mandarin Plaza, a hotel in Shanghai, into a high-end commercial complex as part of an urban renewal project

Hong Kong’s Oootopia owned by Arch Capital, and Weave Living, also converted old hotels in To Kwa Wan and Ma On Shan into co-living residential blocks

Commercial landlords would shudder to think their office portfolios might never again deliver their healthy pre-pandemic returns, while hotel owners bemoan the prospect of empty rooms, longer term.

Yet as a recent Knight Frank report points out, Covid-19-induced lockdowns have exposed the weaknesses of some income-producing properties around the world. In the two-tiered market that has formed, more resilient prime assets continue to hold their value, while non-prime assets have seen values deteriorate.

“As a result, we are witnessing massive moves to repurpose assets and bring them to relevance in the evolving landscape across the region,” notes Knight Frank’s researchers. In what it terms as “the great asset repurposing of the decade”, the global property consultancy finds there are significant advantages in moving towards asset repurposing, as opposed to redevelopment.

Exterior of co-living space Oootopia Kai Tak in To Kwa Wan, Hong Kong. Photo: Edmond So

Particularly in the case of older buildings, the potential to transform under-utilised spaces into “new economy assets” – such as data centres, health care facilities, housing and co-working spaces – is a chance for investors and developers to meet evolving needs.

Christine Li, Knight Frank’s head of research, Asia-Pacific, notes that this trend is already apparent in the region’s hospitality sector, which is heavily reliant on Chinese tourists. “Hotels naturally took the hit with occupancies across the region averaging between 20-30 per cent throughout 2020, leading to significant declines averaging more than 50 per cent in revenue per available room (RevPAR) for most major hotels in Asia-Pacific,” she said.

With no end in sight to border restrictions, Li says investors have been actively expanding their portfolios in particularly hard-hit Hong Kong by acquiring hotels or old residential buildings and converting them into co-living units or serviced apartments – sectors which have proved resilient amid the pandemic.

“A recent example is Weave Living’s plan to convert an old hotel in To Kwa Wan into co-living units, making it the fourth addition to its set of co-living studios in Hong Kong,” she said.

Weave Living opened its third and largest site in Hong Kong – Weave on Anchor – in Tai Kok Tsui in August 2020. Photo: Handout

Oootopia, owned by Hong Kong-based Arch Capital, has converted three three-star hotels into co-living and serviced residences, while applications for conversion of two hotels – the Horizon Suite Hotel in Ma On Shan and the Novotel Nathan Road Kowloon – to residential uses have been approved by the city’s Town Planning Board.