Article written by Michael Gerrity on April 20, 2021.

Retail, Industrial properties remain key investment focus in Q2

According to new research by JLL, total investment volumes in Hong Kong for commercial properties worth over HKD 20 million increased 22.6% year-on-year to HKD 12.5 billion in the first quarter of this year as the Covid-19 pandemic began to ease. It reflects the market sentiment in the first quarter improved compared to a year ago.

Sales of retail properties were the most active among the commercial properties in the first quarter. Around 57% of the total investment volume of commercial properties worth HKD 100 million or above was attributed to retail properties.

The proportion of retail related transactions increased to about 61.2% if you included the sales of commercial properties worth HKD 20 million or above. The total investment volume of retail properties worth HKD 100 million or above grew 15.4% y-o-y. The growth is even more obvious if included the sales of retail properties worth HKD 20 million or above, which grew 33.7% y-o-y.

Industrial property was another market focus in the first quarter. More overseas institutional investors engaged in the industrial sector with Goodman Asia purchasing two properties from Samson Paper Company Limited for over HKD 750 million. Silkroad Property Partners also purchased Smile Centre in Fanling for HKD 321 million.

In the office investment market, office transaction volume significantly contracted quarter-on-quarter by 89.1%, in terms of transactions worth HKD 100 million or above. The drop was mainly due to the miss of major transactions.

Oscar Chan, Head of Capital Markets at JLL in Hong Kong said, "The investment market was driven by the sales of retail properties in the last quarter, in particular the retail properties in non-shopping districts. Investors are interested in buying retail properties as the retail rents have dropped 72% from the market peak to the rental level in the fourth quarter of 2003 and are expected to stabilize. They believe it is probably the right time to buy retail properties as the asking prices have softened and the retail rents are expected to recover."

"As the outbreak eases, we have started to see overseas investment funds returning to Hong Kong's property investment market with several industrial properties acquired. Looking ahead, as the city resumes normality along with the ongoing vaccination program, we expect more large-scale transactions in the second quarter. Retail and industrial properties are likely to remain the focus of investors," he added.