Hong Kong's Commercial, Industrial Property Market Could Rebound To Pre-pandemic Levels On China Capital Influx, Economic Recovery

Investments could rebound by as much as 60 per cent to US$12.6 billion this year after hitting a 17-year low in 2020, says Ricacorp (CIR) Colliers expects mainland players to step up acquisitions, aided by China's economic recovery and a stronger yuan
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Hong Kong's Commercial, Industrial Property Market Could Rebound To Pre-pandemic Levels On China Capital Influx, Economic Recovery

Activity in Hong Kong's commercial and industrial property market is likely to return to pre-pandemic levels this year amid hopes of an economic recovery aided by Covid-19 vaccinations and mainland investors looking to deploy capital, say market observers.

Investment volume could rebound by as much as 60 per cent to HK$98 billion (US$12.6 billion) this year after they fell 40 per cent year on year to a 17-year low of HK$62.56 billion in 2020, according to a forecast by Ricacorp (CIR) Properties. The volume in 2019 stood at HK$103.84 billion.

The number of transactions, meanwhile, could jump 51 per cent to 5,800, the highest volume since 2018, it added. Transactions slid 17 per cent year on year to a record low of 3,833 in 2020.

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"The industrial and commercial property market will bottom out," said Roy Wong, director at Ricacorp (CIR). "Whether it is industrial, commercial or retail, there will be a full recovery. [The market] has crossed the darkness before dawn."

Retail property will see the biggest jump in transactions this year. Photo: Bloomberg

Retail property will see the biggest jump in transactions this year. Photo: Bloomberg

Commercial property investors retreated to the sidelines as the coronavirus outbreak took a toll on the city, sending the economy into its worst recession. The government estimated the economy will contract by 6.1 per cent in 2020, the most on record. Financial Secretary Paul Chan Mo-po, however, said earlier this month that the economy will grow this year and could be boosted further if the pandemic is contained.

Ricacorp (CIR)'s Wong echoed the sentiment, saying that the market is anticipating that the vaccination programme could bring the pandemic under control. The abolition of "double stamp duty" on non-residential property last year could also boost investor appetite, aid transactions, he said.

The number of industrial and commercial property transactions in the second half of 2020 surged 70 per cent from the first half to 2,415 following the removal double stamp duty, the agency said. The firm could boost its headcount by 20 per cent this year based on its market recovery forecasts, Wong added.

Retail property will see the biggest jump in transactions - by 82 per cent to nearly 2,000 deals, or HK$38 billion - as investors snap up heavily discounted properties following the decision "double stamp duty", the agency said.

Bleak outlook for residential property and commercial real estate prices

Colliers International expects mainland players to step up property acquisitions, noting that China's economic recovery and a stronger yuan makes properties priced in Hong Kong dollars more attractive. The consultancy expects a 25 to 35 per cent jump in total investment volume to around HK$70 billion to HK$80 billion in 2021.

"When the border opens, it will have an impact on the market," said Stanley Wong, senior executive director of capital markets and investment services at Colliers. "Some investors have already started to become active."

Meanwhile, CBRE expects investors to target assets catering to fast-growing business sectors, such as technology, telecoms, food and beverage, pharmaceuticals, elderly care and education.

Assets like data centres, cold storage and commercial podiums that can accommodate these industries will be keenly sought after this year, said Reeves Yan, executive director and head of capital markets at CBRE.

"Ample liquidity, low-interest rates and a higher chance of rents bottoming out will prompt investors to become more active," Yan said.

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