Hotel Conversions for Student Housing Offer Growth Opportunity in Hong Kong: Knight Frank

Hong Kong’s student housing market is poised for growth as loosened curbs on foreign student enrolment and a growing trend of hotel conversions offer investment opportunities, according to Knight Frank.

The Hong Kong government has doubled the admission quota for non-local students to 40 percent of enrolment at eight key universities starting from the 2024-25 academic year, a move expected to boost demand for student housing, the consultancy said in a release.

In this context, the high returns, low risk and steady income of the asset class make it an investment opportunity worthy of attention, said Willis Mak, head of private clients for Greater China at Knight Frank. A report by the agency this month on student living investment in Hong Kong highlights cases that show the benefits of transforming underperforming or distressed hotels into student residences.

“Such investments not only provide high-quality accommodation options for students to meet their needs but also offer stable and continuous returns for investors,” Mak said. “Investors should actively seize this market opportunity and capitalise on the growth potential of the student housing market.”

Sav’s Successful Shift

According to Knight Frank’s research, 35,720 beds are currently available across on-campus university halls of residence at 12 institutions. The approval of 62,079 student visa applications in 2023 has left a shortfall of 23,389 beds. Private investors are stepping in to address the gap.

In 2022, fund manager AEW and local builder Crystal Investment acquired Hotel Sav in Kowloon’s Hung Hom area for HK$1.65 billion ($210 million). The partners rebranded the property as Y83 and set about converting it to student housing, with nearly 600 beds and 20,000 square feet (1,858 square metres) of communal space.

Operated by Crystal’s YX student living unit, Y83 achieved an occupancy rate of 85 percent in its first year, reaching 100 percent in its second year, Knight Frank said. Monthly rents at Y83 ranged from HK$7,000 to HK$12,500 in 2023 and rose to between HK$8,300 and HK$14,800 this year.

“Although the rental prices are higher compared to nearby studio units, Y83 remains fully occupied,” the consultancy said.

Mingtiandi reported in September that YX had acquired the Incredible Residences building in Hung Hom and the Hotel Ease Access Lai Chi Kok in Cheung Sha Wan for a combined HK$343 million, with both properties set to be operated as student housing facilities.

In all, Hong Kong has seen the establishment of 10 purpose-built or converted hotel student accommodations using private funds, collectively offering a total of 2,980 beds, the Knight Frank report said.

Motivated Sellers

With student housing standing out as a rare bright spot amid Hong Kong’s property slump, owners of hotels have rushed to put their assets up for sale.

Knight Frank pointed to three properties being marketed by the family of the late “Shop King” Tang Shing-bor as ripe for conversion: the 598-room Hotel Cozi Harbour View in Kwun Tong, the 430-room Hotel Cozi Resort Tuen Mun and the 199-room Hotel Ease Mong Kok.

Also being shopped is the Eco Tree Hotel in Sai Ying Pun, owned by the family of the late “Minibus King” Ma Ah-muk.

In July, an entity linked to Centaline Property Agency founder Shih Wing-ching bought the 63-key Popway Hotel in Tsim Sha Tsui for a reported HK$180 million, with plans to invest in about 2,000 student beds in Hong Kong over the next two to three years.