Institutional investment in HK real estate rebounds to HK$25.5b in second quarter

Institutional investment has returned to the Hong Kong real estate market, which has reached a turning point, professional services and investment management firm, Colliers said.

Renewed confidence from a solid economic recovery and easing of coronavirus infections and has led to increased investment transactions. Deal value reached HK$25.5 billion (US$3.3 billion) in the second quarter, rising by 168 percent, quarter on quarter, and 190 percent from the year before.

Rosanna Tang, head of research, Hong Kong and Greater Bay Area, said that at the beginning of the year, Colliers had held the view that the estate market would recover in 2021.

“At the mid-year point, we see this as a landmark and a ‘turning point’ where recovering demand and growing confidence have taken place. The core sectors will kick on from this point, and we expect the market across multiple sectors to bottom out before year-end.''

Thomas Chak, executive director of Capital Markets and Investment Services at Colliers, said, one of the biggest turning points has been the return of institutional investors.

These investors accounted for 71 percent and 65 percent of the second quarter and yeat-to-date commercial transaction volume, respectively, he said.

“The strategic drivers behind the activity saw funds eyeing defensive or stable income streams with strata-titled office in the CBD, neighborhood malls, and highly lucrative cold storage assets being of interest,” Chak said.

“While we forecast the price level for most commercial sectors to bottom out in 2021, the next few months should provide a window of opportunity for investors to hunt for these assets before prices begin to rebound from 2022 onwards.

Also, leasing activity in the Central Buisness District gathered pace, Colliers said.

Central and Admiralty led the way. Quarterly net take-up rebounded to 68,300 square feet, the first positive quarter since the second quarter of 2018.

Mainland companies and financial companies led the charge and chose to relocate.

The rental drop further narrowed in the second quarter. Overall and CBD rents fell by 1.6 percent and 1 percent quarter on quarter, respectively, compared with 2 percent and 1.6 percent quarter on quarter drop in the first quarter.