Hong Kong’s landlords rush to put offices up for sale, but are they already too late?

Hong Kong’s landlords are putting a record number of office space on the market, encouraged by a sale in May of the Murray Road car park that successfully set a benchmark for commercial property prices in the world’s most expensive real estate market.

The number of transactions have risen three quarters in a row to a record in the three months ended June, with HK$13.7 billion of office space changing hands, more than double the deals in the previous quarter, according to data by Colliers International.

The turning point was on May 16, when Henderson Land Development won a government tender for the Murray Road car park building, agreeing to pay HK$23.3 billion (US$3 billion), or HK$50,064 per square foot, for the right to build an office tower on the largest piece of commercial land in the centre of Hong Kong. That was a shot in the arms for the landlords in surrounding properties, who raised their prices immediately by between 10 and 15 per cent, agents said.

“Office space that was asking for HK$39,000 per sq ft before the Murray Road sale rose to HK$50,000 per sq ft, or even more,” after the record was established, said Knight Frank’s consultancy head Thomas Lam.

And landlords that wouldn’t have been in the market came out of the woodwork to take advantage of the buoyant prices. The Excelsior Hotel in Causeway Bay, which first opened in 1973, was offered for sale, for conversion into an office tower. The Lo family, in the middle of a bitter dispute over their late patriarch’s estate, decided to put the Great Eagle Group’s Langham Place office tower in Mong Kok up for sale, as did Nan Fung Group with the Octa Tower in Kowloon Bay. The three properties can each fetch between HK$50 billion and HK$65 billion, agents and valuers said.