This Asian Country is the Second-most Favorite Destination for Cross-border Investments
This southeastern Chinese country has attracted more than $13 billion in investments in just 19 months
By Komal Nathani •
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Hong Kong moves up to 14 places and becomes the second-most favourite destination of cross-border investments in the commercial real estate activity, according to an annual report on global real estate investment by Cushman and Wakefield. It's also the first city from the region to make the global top five for three years. Hong Kong has seen a rise in real estate investment activity.
According to the report, the 18 per cent increase in commercial real estate investment is being led by Asia, both as a source of capital and as an investment destination. The Asian buyers are responsible for 45 per cent of all cross-border investment.
The demand for commercial real estate property is increasing at an exponential rate in Hong Kong. A June report of this year showed a surge in the demand for a commercial real estate with the increasing number of companies foraying into Hong Kong. It states that in April, Kowloon East (a northern constituency of Hong Kong) accounted for 66.6 per cent of the new settings in terms of floor area across Hong Kong. Its rental levels have advanced 1.4 per cent in the first four months.
Hong Kong – a Hotbed of Real Estate Investments
According to a JLL report of this year, Hong Kong has seen a high demand in co-working spaces. The last few months have seen an unprecedented amount of take-up from the co-working sector with both new entrants and traditional occupiers, as per the report. "In a market where net demand growth has been thin, the arrival of co-working space operators represents a welcome source of new demand for the leasing market," says Paul Yien, Regional Director of HK Markets at JLL.
The report also states that the growing popularity of co-working spaces in Hong Kong is not just driven by the startups but also the traditional businesses that are looking to better utilization of real estate space. This could help in taking better advantage of the greater flexibility, convenience and savings that can be provided by operators.
Investment in Asian cities is predominantly the preserve of domestic capital, although regional investors have increased their market share over the year.
Carlo Barel di Sant'Albano, head of global capital markets at Cushman & Wakefield, who wrote the report, highlights the risks in the macroeconomy such as rising interest rates. He says, "There is no shortage of capital targeting real estate across myriad geographies and risk profiles. Indeed, we are seeing many investors increasing their allocations to real estate and they are evolving their strategies to allow for variable supply and risk tolerances."
He adds, "These are the key factors determining whether volumes rise further still; given the current environment, volumes could exceed current levels by up to 2% next year. This is likely to be led by global buying, but investors need to keep a close eye on structural shifts in the occupational market as both an opportunity and a challenge."
The international director and head of capital markets of Greater China at Cushman and Wakefield capital markets, Francis Li, says, "China meanwhile is likely to feature more on global buy lists going forward, following moves by President Xi to ease entry requirements for foreign investors."
"The Tier 1 Mainland cities and Hong Kong will be the key focuses, but a greater share of investment will target decentralized and emerging CBD locations due to a shortage of opportunities and high prices in the CBDs, as well as new supply and transport improvements in these new areas," he adds.
