Mainland Investors Dominate as Big Ticket HK Office Deals Jump by 136% in One Year

While restrictions on outward flows of capital have been blamed for drop-offs in Chinese investment in the US, UK and Australia, the impact of mainland money is still being felt in Hong Kong, where investors from north of the SAR border helped boost sales of big ticket commercial properties by 136 percent in one year, according to figures from Cushman & Wakefield.

The value of successful office and retail transactions with price tags of HK$100 million ($12.74 million) and above jumped to HK$44.79 billion during the second quarter of 2018, according to the property consultancy’s Greater China Capital Markets Express report, which was published this week. That number was up from HK$8.96 billion during the same quarter of last year and represented an 8.8 percent increase over the first quarter of this year.

Led by Hengli Group’s HK$15 billion purchase of Swire Properties’ Cityplaza Three and Cityplaza Four in June, mainland investors were involved in 38 percent of the total number of deals concluded during the quarter.

Mainland Buyers Turn Focus to Emerging Commercial Centres

In addition to being the biggest sale of the quarter, Hengli’s acquisition of the pair of Swire assets in Quarry Bay was also the second most expensive acquisition of a single property asset in the city ever. The blockbuster deal fits into a trend of mainland investors moving their activity beyond the core business district of Central into alternative commercial locations in the city.

“These recent transactions signal the continuation of a trend which started late last year with the purchase of 8 Bay East by LVGEM in which, in the absence of investable assets in core locations, Mainland investors are increasingly willing to consider opportunities in decentralized areas,” Cushman & Wakefield director and head of research for Hong Kong Reed Hatcher explained to Mingtiandi. Hatcher added that mainland buyers were focusing on assets with superior access to public transport and sea views.

Mainland money also played the leading role in the second-largest deal of the quarter, Nan Fung’s HK$8 billion sale of the Octa Tower in the emerging commercial centre of Kowloon Bay to a consortium of Hong Kong’s CSI Properties and Asia Standard International Group (ASI) together with Chongqing tycoon Cheung Chung Kiu. In his day job, Cheung serves as chairman of mainland developer CC Land.

Offices Star Amid High Rents and Limited Supply

According to Cushman’s Hong Kong research team, office assets accounted for around 79 percent of Hong Kong’s total commercial transactions during the most recent quarter, as investors remain enthusiastic about a market where some landlords are now asking for as much as HK$200 per square foot of office space per month.

In all C&W found that mainland investors accounted for HK$25 billion of en bloc office acquisitions during the quarter, or about 79 percent of all purchases of over HK$100 million.

With the volume of commercial transaction volumes in Hong Kong having reached nearly HK$86 billion in the first six months of 2018, according to Cushman’s figures, the city has already reached 50 percent of the 2017 full-year total of HK$170.6 billion.

Based on that half-year level of performance, the company’s research team now predicts that the amount of commercial property bought and sold this year in Hong Kong should be comparable to last year’s record-setting total.