Analyst wary for Hong Kong’s commercial real estate market recovery

Interest rate hikes and higher costs of capital can make the market go over the edge.

With China easing its COVID-19 rules and travel restrictions in December and the recent stock market rebound, retailers are anticipating the opening of the borders between Hong Kong and China that could lend some support to the declining commercial real estate market, a report by CBRE reveals.

However, the analyst warns that interest rate hikes will still continue to weigh heavily on investment markets. This means the commercial real estate market is expected to receive a low volume of investments.

In CBRE’s report, investors are offloading their assets to pile up capital. This is seen as investors trying to wait for better deals and other opportunities before re-entering the market. Meanwhile, some asset owners who are facing some financial difficulties have actively disposed of their commercial assets like the recent sale of Stan Group/Tang family selling of a 12,030 sq. ft. strata unit at Vigor Industrial Building, Tsing Yi for $74m.

The year also transaction volume of commercial properties shrunk by 24.2% MoM.

“Higher cost of capital has begun to trigger more distressed sales from financially troubled vendors. The capital value of commercial assets is likely to continue on a decline mode with further cap rate expansion,” CBRE said.