With Hong Kong’s commercial real estate market starting to rapidly reprice, senior executives experienced in turning around troubled assets shared pointers on how buy-fix-and-sell works in the Asian financial hub at the Mingtiandi Hong Kong Forum on Tuesday. Watch the full recording>>
In a panel discussion of value-add and opportunistic strategies for Hong Kong, experts from Link REIT, Lofter, Stephenson Harwood and BEI gave their insights on acquiring commercial assets in Asia’s priciest real estate market, as well as on refitting, redeveloping and repositioning those properties.
The conversation at the all-day event, which was sponsored by Yardi, kicked off with a pointed query from moderator Sherman Hung of DBS, as he polled the panellists on whether they regarded the challenges pressuring Hong Kong’s real estate market as structural or merely cyclical.
John Saunders, group chief investment officer at HKEX-listed Link REIT, cited the current “one-way flow” of cross-border traffic as a hurdle but voiced optimism that work-from-home headwinds were already priced in.
“I think I’m a little hesitant, generally speaking, to find much real, full structural change in life,” said Saunders, who joined Link in March from investment giant BlackRock. “So I think the simplistic answer to your question is it’s more cyclical than it is structural. Although I think there are some changes which are certainly going to be longer lasting.”
Economic Puzzle
Collin Lau, founder and CEO of healthcare-focused property investor BEI Group, gave his personal spin on the structural-versus-cyclical case: “If things last beyond my retirement age, that’s structural; if I see things reverse in the next couple of years, I call it cyclical.”
Carol Chow of Lofter and Janice Yau Garton of Stephenson Harwood
Lau also likened the work-from-home phenomenon to e-commerce, with both likely to capture a certain percentage of their respective markets for the foreseeable future.
“But times will come that if you are doing the right economic activities, you’ve always got demand to come back to fill the void,” said Lau, an ex-colleague of Saunders from their days at blue-chip builder Hongkong Land.
At Hong Kong-based Lofter Group, founder and chairperson Carol Chow has steered the company’s urban redevelopment projects, including a tie-up with Singapore’s SC Capital Partners to transform a set of ageing buildings on Ap Lei Chau Island into a 35,000 square foot (3,251 square metre) harbourfront residential complex with retail podium.
On Tuesday’s panel, Chow highlighted uncertainty regarding US interest rates, which now look set to stay “higher for longer” than many analysts anticipated, as posing challenges for investors trying to predict the direction of the Hong Kong market.
But with Lofter continuing to expand its portfolio in the city, Chow sees some potential benefits in the lack of clarity.
“An uncertain market may sometimes mean an easier market to find opportunities,” she told the audience of around 200 industry executives.
Experiential Amenities
Stephenson Harwood’s Janice Yau Garton, who specialises in property investments at the global law firm, said redevelopers must consider the importance of experiential real estate in adding value to their projects.
“The occupiers are no longer looking for just concrete in the air anymore,” Yau Garton said. “You can’t just buy a piece of property, rely on being a landlord and just wait it out for your property prices to double.”
The much-talked-about “flight to quality” is compelling landlords to help occupiers bring staff back into the offices, sometimes by providing amenities running the gamut from flex space and tenant apps to EV charging and paddle tennis tournaments, she said.
A Panel in Pictures
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