Industrial sector dominates Hong Kong’s investment market in Q1

More than half of the US$1.3b transactions in Q1 were for industrial assets.

Hong Kong’s total investment volume reached HK$10.1 billion (US$1.3 billion) in Q1 2021, up 30% YOY. Colliers says transaction volume saw positive YOY growth in office, industrial and retail sectors. Institutional investors have become more active where their transactions accounted for over half of the total investment volume in Q1 2021. Most of them favoured industrial assets.

“We expect to see the investment market sentiment to further recover and bring about a higher level of transactions for this year, especially compared to the low base of 2020,” said Rosanna Tang, Head of Research, Hong Kong and Greater Bay Area at Colliers.

Defensive assets to generate long-term income

Among the total investment transaction volume of HK$10.1 billion in Q1 this year, 53% were industrial assets, including cold storage and data centres. This was backed by the long-term macro drivers such as the growing 5G network, cloud computing, e-commerce and the rising F&B demand. In addition, 69% of the retail transactions concluded in Q1 were neighbourhood retail assets.

“Over the past quarter, we observed  increased investment activities from both local and overseas investment fund managers, with most of them acquiring industrial properties under their portfolio for seeking long-term returns. We recommend investors pay attention to defensive assets, such as industrial properties and retail malls which could generate long-term growth potential,” said Stanley Wong, Senior Executive Director, Capital Markets & Investment Services.

Solid investment appetite and government initiatives to facilitate transaction rebound

We expect the transaction volume to continue to rebound in the second half of 2021. Growing investment appetite from Mainland and local investors is now being amplified by a return of institutional investors, as well as the recent changes in government policies.  

“With the solid investment appetitite, we believe the bid-ask spread could narrow in the second half of 2021, where sellers will become more realistic in their asking price during negotiation,” said Thomas Chak, Executive Director, Capital Markets & Investment Services.

Recent changes in government policies should provide some positive spins to the investment market 

“The removal of the double stamp duty on non-residential property transactions implemented in November 2020 lowers the entry cost for commercial transactions. Moreover, the pilot scheme for charging land premiums at standard rates for lease modifications for industrial properties redevelopment should streamline approval process, while allowing investors to better estimate the redevelopment cost,” added Chak.

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