Investment Insider OCTOBER 2019 MARKET UPDATE Hong Kong Market Update – Uncertainties and opportunities Hong Kong’s investment market has had a challenging Q3. Volumes for the quarter were at HKD 20.9 Billion, down 34.7% from the same quarter last year with 54 recorded transactions. Total transactions so far this year stand at 230 versus 346 at the end of Q3 2018. The ongoing trade-war and social unrest have each played their part to create a wave of uncertainty in the market. However, investors continue to look for ‘well- priced’ opportunities across key sectors such as co-living, value-add conversion, strata-office, en-bloc office buildings, and private residential redevelopment sites. Coming off a very-high level, we are seeing the pricing gap (the bid-ask spread) starting to narrow, but the expected ‘stress’ in the market has so far not materialized. Hong Kong has always had a natural resilience and in the past any downturn in the market has been met with a sharp bounce-back. Will this time be any different? The recent policy address and increase on mortgage LTVs has led to a rise in residential transactions which has provided a greater stimulus in the residential investment sector, while at the same time the vacancy tax may also have its own effect on prices. As we look beyond our borders, a key theme we are witnessing is the wish for investors to strategically diversify a small percentage of their holdings internationally, be it in London, Singapore, Sydney, Tokyo or other key gateway cities. In this issue we take a snapshot of some of these international gateway markets. MARKET UPDATE FEATURED OPPORTUNITIES - HONG KONG HONG KONG TRANSACTIONS - Q3 2019 GOVERNMENT SITES SOLD JUL-OCT 2019 HOT STOCKS - HONG KONG INTERNATIONAL MARKETS HIGHLIGHTS In this issue of the Investment Insider we give you an update on Hong Kong’s market and focus on some of our current opportunities. We also move across borders and ask some of our local offices on global gateway cities to share their latest trends and opportunities, as well as present an exciting island investment opportunities in the Maldives – Reethi Beach Resort. We take a quick look at key transactions during Q3 2019, and highlight two projects the team recently completed. We hope you enjoy! Antonio Wu Deputy Managing Director | Hong Kong
Transcript
InvestmentInsider
OCTOBER 2019
M A R K E T U P D A T E
Hong Kong Market Update – Uncertainties and opportunities Hong Kong’s investment market has had a challenging Q3. Volumes for the quarter were at HKD 20.9 Billion, down 34.7% from the same quarter last year with 54 recorded transactions. Total transactions so far this year stand at 230 versus 346 at the end of Q3 2018. The ongoing trade-war and social unrest have each played their part to create a wave of uncertainty in the market.
However, investors continue to look for ‘well-priced’ opportunities across key sectors such as co-living, value-add conversion, strata-office, en-bloc office buildings, and private residential redevelopment sites. Coming off a very-high level, we are seeing the pricing gap (the bid-ask spread)
starting to narrow, but the expected ‘stress’ in the market has so far not materialized.
Hong Kong has always had a natural resilience and in the past any downturn in the market has been met with a sharp bounce-back. Will this time be any different? The recent policy address and increase on mortgage LTVs has led to a rise in residential transactions which has provided a greater stimulus in the residential investment sector, while at the same time the vacancy tax may also have its own effect on prices.
As we look beyond our borders, a key theme we are witnessing is the wish for investors to strategically diversify a small percentage of their holdings internationally, be it in London, Singapore, Sydney, Tokyo or other key gateway cities. In this issue we take a snapshot of some of these international gateway markets.
MARKET UPDATE
FEATURED OPPORTUNITIES - HONG KONG
HONG KONG TRANSACTIONS - Q3 2019
GOVERNMENT SITES SOLD JUL-OCT 2019
HOT STOCKS - HONG KONG
INTERNATIONAL MARKETS
HIGHLIGHTS
In this issue of the Investment Insider we give you an update on Hong Kong’s market and focus on some of our current opportunities. We also move across borders and ask some of our local offices on global gateway cities to share their latest trends and opportunities, as well as present an exciting island investment opportunities in the Maldives – Reethi Beach Resort. We take a quick look at key transactions during Q3 2019, and highlight two projects the team recently completed. We hope you enjoy!
Antonio WuDeputy Managing Director | Hong Kong
Celestial Villa is an exclusive collection of twelve detached town houses near Clear Water Bay, Sai Kung and Hang Hau. It has open sea views and is surrounded by a green tranquil environment offering privacy and comfort. Celestial Villa is a Residential zone (Group C) and has a maximum plot ratio of 0.6 times. This is an opportunity to redevelop the complex into an oasis of exceptional and unrivalled lifestyle.
Site Area: Approx 62,500 sq.ft. Max. Development GFA: 37,500 sq.ft.
Celestial Villa
DD223 Lot 246, Sai Kung, New Territories, Hong Kong
Ken Ma (E-323884) : 6300 7100Elsa Chung (E-392415) : 9843 1177
Tung Chiong Commerical Building
221 - 221A Nathan Road, Jordan, Kowloon, Hong Kong.
A commercial asset along Nathan Road – the main artery in Kowloon, and near the Jordan MTR station. Built in 1986, the property comprises 17-stories with retail shops on the G/F and B/F, and wholesale fashion stores from 1/F to 14/F. This is a great repositioning opportunity, for example – converting the asset into medical offices could see upper floor rents grow to over 50%.
Site Area: 3,107 sq.ft. Total Gross Floor Area: 34,178 sq.ft.
Russell Lam (E-295650) : 9382 2202
F E A T U R E D O P P O R T U N I T I E S - H O N G K O N G
83-85 Sing Woo Road, Happy Valley, Hong Kong
Located in the high-end residential district of Happy Valley, a popular area with locals and expats, the captioned includes 6 of 12 total domestic units and a sizeable carport located in the basement. The sale includes building management rights and presents a manageable lump sum opportunity to invest or implement a property enhancement strategy to increase the asset’s value.
H O N G K O N G T R A N S A C T I O N S - Q 3 2 0 1 9
KEY MARKET HIGHLIGHTS
30,000 (sq.ft.) 892M
TOTAL
29,733
UNITDATE
72019
Various units in Tonnochy Towers, 250-274 Jaffe Road, Wan Chai
RETAIL
HKHK
243,302 (sq.ft.) 4,300M
TOTAL
17,674
UNITDATE
102019
Kimberley Hotel, 28 Kimberley Road, Tsim Sha Tsui
HOTEL
HKHK
8,351 (sq.ft.) 1,000M
TOTAL
120,000
UNITDATE
82019
16 Perkins Road, Jardine’s Lookout
RESIDENTIAL
HKHK
317,000(sq.ft.) 1,300M
TOTAL
4,000
UNITDATE
82019
Man Sun Logistics Centre, 3B Hung Cheung Road, Tuen Mun
INDUSTRIAL
HKHK
SALES VOLUME:APPROX.
HK$20.88B
Q32019
34.7% from Q3 2018
43.2% from Q3 2018
NO. OF PROPERTIES:
54
2018 FULL YEAR:Total Sale Volume:
Approx. HK$ 203.98B
No. of Properties: 414* Source: RCA (RCA figures for HK investment volume, including office, industrial, retail and hotel closed transactions with deal size over USD 10 million)
G O V E R N M E N T S I T E S S O L D J U L - O C T 2 0 1 9
# NKIL 6554
Kai Tak Area 4A Site 2, Kai Tak, Kowloon
Residential
Site area : 197,550 (sq. ft.)
# KIL 11262
Junction of Lin Cheung Road & Austin Road West, Kowloon
The Maldives continues to wow travelers from across the globe with over 1.6m tourists expected this year. With its ‘one-island- one-resort’ policy, the Maldives is also Asia-Pacific’s highest rate-yielding market. Global hotel investors – be it private families, hotel groups, owner-operators, PERE funds and developers, are all taking note with over USD 350m in transactions this year alone. Many investors are now interested in owning, creating or expanding their presence in this unique market to cater to the growing outbound travel trend.
Colliers is proud to present a stunning opportunity to acquire Reethi Beach Resort - an idyllic four-star resort in the spectacular UNESCO Biosphere Reserve of Baa Atoll.
With 130 beach and over-water villas, the resort presents investors with a rare opportunity to purchase an operating hotel with significant rebranding, asset enhancement and value-creation potential. The beautiful in-house reef and the manta ray and whale shark sanctuary of Hanifaru Bay make this is truly a unique destination. To discover more please visit: www.colliers.com/asia/reethibeach or contact Shaman Chellaram directly at [email protected]
SOLE AGENTMALDIVES
With the ongoing US-China trade war and a series of policies and measures to deleverage and tighten real estate financing this year, investors have become increasingly selective while tenants’ leasing demand has decreased. Investors would generally prefer defensive products with low leasing risk, such as stabilized income-producing offices with accessibility to metro lines and future infrastructure improvements. On the sell side, vendors are becoming more realistic in price and willing to negotiate based on reasonable cap rates.
CHINA
COFCO JOY CITY PHASE II IN SHANGHAI• Total GFA: 94,445 sq m• Prime Grade A Office• The Center of Jing’an
emerging CBD
BORUI PLAZA IN BEIJING• Total GFA: 78,411 sq m• Office in Fringe CBD Cluster• Completed in 2012
INTERNATIONAL COMMERCE PLAZA IN GUANGZHOU• Total GFA: 100,711 sq m• Two office towers in Pazhou • Anchor tenants with
RETAIL HOUSES IN PECK SEAH STREET• Total Floor Area: 19,938 sq.ft.• 3-min walk to MRT station• Stable income with hotel
conversion potential
I N T E R N A T I O N A L M A R K E T S
TMARK GRAND HOTEL IN SEOUL• Land Area: 4,562.1 sq m• No. of rooms : 576• Renovated in 2016
KOREAA strong investment in tourism infrastructure and increased destination marketing has increased Korea’s popularity as a travel destination, creating new investment opportunities in the hospitality sector in Seoul, secondary cities, and resort destinations. The investment market maintained a solid pace of activity throughout 2019, with several transactions in businesses/limited-stay hotels fueled by the disposition of fund-owned assets. Majority of buyers are local investors; however, the market is seeing investors from Singapore, Malaysia, and Japan.
2019 cap rates for Korea are slightly compressing given a recovering tourism sector, and we expect hotel investments to perform well in 2019. The logistics sector also continues to attract interest from international investors.
Singapore investment sales in Q3 jumped 53.7% QOQ and YOY to SGD11.2bn (USD8.1bn), according to Colliers Research. The growth was driven by stronger sales across all segments of the property market, as global capital continues to seek opportunities in safe and stable investment destinations. Singapore remains firmly on investors’ radar owing to its growth potential, stable government, and pro-business policies. Singapore real estate – particularly commercial and hospitality assets is expected to continue to attract interest.
SINGAPORE
HOTEL PROJECT IN KYOTO HIGASHIKUJYO• Land size: 1,456.88 sq m• 12-min to Kyoto JR station by foot• No. of rooms : 194
Offices in key CBD locations remain stable, with an increase in pre-letting activity which has left investors with a feeling that any upcoming vacancy risks are minimal threats to investment returns. The hotel sector, despite the Rugby World Cup and the 2020 Tokyo Olympics, is experiencing a slowdown in Chinese and Korean arrivals for 2019. Industrial assets continue to perform well, especially in ‘last-mile’ locations, attracting investment-grade tenants at slow-increasing rents. And retail assets outside key streets retain a negative perception, particularly because of the cyclical pressures which depend on tourism.
We do forecast continued aggression from domestic purchasers as they chase after assets in high demand, particularly stabilised opportunities in Tokyo which could put pressure on cap rates.
JAPAN
I N T E R N A T I O N A L M A R K E T S
For international market, please contact Shaman Chellaram at [email protected]
PRIME BOUTIQUE BUILDING IN THE HEART OF MAYFAIR• Total area: 17,165 sq.ft.• B/F, G/F and 5 upper floors• Leasehold interest to 2120
UNITED KINGDOMCentral London investment transaction levels remain down on 2019 vs 2018, driven in part by political uncertainty surrounding Brexit but also by a lack of available stock. Where property has been openly marketed and priced in line with comparable evidence, there have been strong levels of demand from both domestic and overseas buyers, particularly from the US, Middle East and Europe. Well capitalised owners, conscious of the lack of available stock to re-invest in, have been reluctant to sell particularly as there is now the prospect of rental growth. Historically low levels of supply are sustaining Grade A rents in Central London and as the supply pipeline diminishes further; approximately 50% of all space under construction has either been pre-let or let during construction.
THE CLARIDGES IN NEW DELHI• Built Up Area: 149,150 sq.ft.• Famous international
chain-branded hotels • Located in the heart of New Delhi
100% LEASEHOLD INTEREST OFFICE TOWER IN SYDNEY• Net lettable area: 18,451 sq m• Quality tenants with attractive
review profile• Dynamic location between the
Sydney Core and Barangaroo
AUSTRALIAAustralia’s investment market has seen further compression over 2019 as offshore investors continue to focus on the commercial and logistics sectors. The Sydney CBD market sentiment to yield compression is due to another cash rate cut with The Reserve Bank of Australia (RBA) reducing the cash rate to a record low of 0.75 per cent- the lowest on record. Those markets where rental growth is expected, such as the Sydney CBD, have greater scope for yield compression, as increasing returns in income are now highly sought after by investors in such a low-yielding investment environment. We expect yields to compress and have forecasted Sydney Prime CBD yields below 4%. When compared with Sydney, Colliers research have Melbourne’s yields as lower due to the Melbourne CBD’s stronger rental growth outlook and record low vacancy. The Melbourne supply outlook is also constrained, given planning restrictions and a lack of sites. The decision to cut rates was ‘to further support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target.
INDIAReal estate investment has increased due to improved investor confidence from new reforms. Capital inflows have surpassed USD 53 billion since 2008, and investment during 2014 to Q1 2019 accounted for 59% of total inflows into the market. Residential is a favored asset class for domestic investors, however, due to a sustained demand in commercial offices, rising rents, and the potential to include assets in REITs, institutional investors are favoring commercial office assets. Momentum in hospitality is evident from the mega-deals currently happening in Indian markets.
Colliers was appointed by an MNC owner-occupier to sell their Hong Kong headquarters, which comprises most of the podium floors in Victoria Centre in North point, as part of their relocation plan.
Through a strategically planned disposal exercise, which adhered to the seller’s price expectation and relocation timeline, Colliers successfully secured a buyer for the rare harbor view property at HKD 500 million.
VICTORIA CENTRE, NORTH POINT
Colliers acted on behalf of Hong Kong private investors for the acquisition of 8 Salisbury Square in London – a prime freehold Grade A building offering 165,523 sq. ft. of stunning office accommodation and the former headquarters of KPMG. The deal reflects the continued demand from this region for quality assets across gateway cities, with London remaining a key destination.
The transaction cements our Capital Markets team’s ability to assist clients exceed their objectives and accelerate their success by identifying and seizing key opportunities both locally in Hong Kong and across global gateway markets.
