Hong Kong’s 2023 commercial property investments just over half of 2022 totals

There were only 105 transactions during the year.

High financing costs deepened negative carry of investment properties, causing investors to display smaller appetite.

According to a CBRE report, commercial real estate investment volume (deals worth over HK$77 million, excluding pure land or related transactions) totaled HK$40.0 billion, just 53% of last year’s total. Only 105 deals were completed during the year, about 60% of that in 2022.

“Despite weak demand from return-driven investors, owner-occupiers displayed resilient demand in the second half of the year. The largest transactions involved the Securities and Futures Commission spending HK$5.4 billion on 12 floors at One Island East in Quarry Bay for self-use. Li-Ning also paid HK$2.2 billion for Harbour East in North Point for use as its regional headquarters,” the report said.

The resumption of quarantine-free travel failed to result in a noticeable recovery in Chinese investor demand. Only HK$8.5 billion of transactions involved mainland Chinese investors, down from HK$14.6 billion in 2022.

Jonathan Chau, Executive Director, Head of Investment Property & Private Office, Capital Markets, CBRE Hong Kong: “Deep negative carry, banks’ cautious lending, economic and geopolitical uncertainties as well as weak demand in some local property sectors combined to half investment volume year-on-year in 2023. It has also hit a 15-year low. Looking ahead, anticipated rate cuts will likely improve business and investment market sentiment and result in a recovery in deal flow in 2024. Relatively high levels of financing costs, however, will prevent a v-shape rebound in transaction volume and capital values.”