Hong Kong property investment to grow by 20 per cent next year, led by hotels, serviced apartments, says Cushman

Hong Kong will see property investment grow by a fifth in 2022, with hotels and serviced apartments set to become investors’ main acquisition target, according to Cushman & Wakefield.

There will be 200 major transactions next year valued at around HK$100 billion (US$12.81 billion), the highest since 2018, according to the global property service firm’s “Hong Kong and Greater Bay Area (GBA) Property Market 2021 Review and 2022 Outlook.”

As the pandemic gradually eased and the economy regained some life this year, Hong Kong’s property market has shown signs of recovery.

“Investors worldwide have recently been drawn to emerging multifamily conversions such as serviced apartments and hotel properties,” said Tom Ko, executive director and head of capital markets at Cushman & Wakefield. “The aforementioned asset classes will likely benefit from the revival of tourism activities when the border gradually reopens.”

Multifamily conversions – hotels converted into long-stay flats for rental – are proving an attractive investment, said Ko.

In November, American developer Hines bought the 158-room Butterfly on Prat hotel in Tsim Sha Tsui for HK$930 million. Hines planned to convert the hotel into a co-living flagship to be managed by local residential operator Dash Living.

Major investment deals in 2021 were mainly driven by local investors and foreign funds. The number of transactions more than doubled from the previous year.

Industrial buildings and development sites were among the most active sectors, each accounting for about 30 per cent of the total volume, according to Cushman & Wakefield.

“Demand for industrial buildings in 2021 was at a historic high, and we expect this to continue in 2022,” said Ko.

On Monday, Sun Hung Kai Properties agreed to lease an en-bloc industrial building spanning 158,000 square feet to Kerry Logistics. Located in Tuen Mun, in the New Territories, the logistics warehouse is near the Hong Kong International Airport and enjoys well-developed transport facilities.

Sun Hung Kai, Hong Kong’s biggest home builder by market value, owns an industrial and logistics portfolio with gross floor area of about 4.5 million square feet along with nearly 12,000 car parking spaces.

Across Hong Kong, the sector consists of 43 industrial premises available for rent, including buildings, industrial-office developments and advanced logistics centres.

“During the pandemic, industrial has offered a higher rental return yield compared to other commercial sectors such as office and retail,” said Raymond Fok Lee-man, head of the Industrial and Logistics Portfolio Department at Sun Hung Kai.

The industrial sector also benefits from government policies, and the fact warehouse rent has been the least affected by the pandemic, according to Reeves Yan, head of capital markets at CBRE Hong Kong.

“The trend will continue in 2022. However, it may slow down due to the shortage of available stock in the market as a lot of stock has been absorbed by institutional buyers during 2021,” said Yan.

Ko expects industrial buildings, residential development sites and multifamily conversions to become the three key pillars of the investment market in 2022.