In this file photo, a pedestrian walks past residential buildings in the Pok Fu Lam district of Hong Kong, China, on July 30, 2014. (BRENT LEWIN / BLOOMBERG)
Hong Kong’s commercial real estate market woes continued with investment volume in the third quarter falling to its lowest quarterly total since 2009, with just HK$4.4 billion ($567.7 million) worth of deals completed, according to CBRE (Coldwell Banker Richard Ellis) research released on Wednesday.
The year-to-date investment volume was HK$18 billion, just 26 percent of the HK$68.8 billion booked for 2019 as developers continued to offload non-core retail properties.
The year-to-date investment volume was HK$18 billion, just 26 percent of the HK$68.8 billion booked for 2019 as developers continued to offload non-core retail properties
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But activity from Chinese mainland buyers, who have been quiet for a few quarters, picked up as they purchased HK$2.2 billion of assets in the third quarter.
“The commercial property market remains very soft in terms of transaction volume, despite the strong inflow of capital in recent months,” said Reeves Yan, executive director for capital markets of CBRE.
Geopolitical and public health uncertainties are likely to remain the major concerns for investors, and the chance of seeing a noticeable rebound in investment volume before the end of the year is low, he said.
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Despite office leasing momentum registering a slight improvement, grade A office vacancy continues to climb and rents continue to fall, especially in Hong Kong’s core business district, Central.
The overall vacancy was up 0.8 percent to 9.6 percent, while rents dropped 3.9 percent compared to the second quarter. Central recorded the sharpest decline, with rents falling by 4.8 percent quarter-on-quarter, bringing the year-to-date drop to 14.8 percent.
“The third quarter saw office leasing momentum remain subdued despite a relative improvement from last quarter,” said Alan Lok, executive director for advisory and transaction services – office services of CBRE.
“Corporates are still highly cautious about making real estate decisions and cost-saving continues to be their number one priority,” he noted.
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In other development, the drop in high-street shop rents accelerated to 5.7 percent in the third quarter from 5.5 percent in the second quarter. Shopping mall rents remained stable as landlords opted to support retailers via marketing and promotional measures.
Warehouse rents fell by 2.4 percent in the third quarter, a further drop compared to the 1.3 percent in the second quarter. Leasing demand remained subdued aside from data center and cold storage operators amid weakened demand from Western economies.
